Tax-Exempt Donation: What Can You Write Off?

A tax-exempt donation is a charitable donation you can claim as a tax write-off. This allows you to save money while doing something good for the community. However, just because you donate to a charity doesn't mean the donation will be tax exempt. And even if it is, you may still be unable to get a tax exemption if you don't follow proper procedures. Take the time to research the charities to which you are interested in donating and understand what you have to do to qualify for a tax exemption.

Basics of Donations and Tax Exemptions

Note first that you will write off donations only if the total value of your qualified charitable contributions exceeds your standard IRS deduction for the year.

To write off your donations to charity, you have to donate money or property. Money can be donated as hard cash or through checks or credit cards. Property can include physical items, land and buildings. Furthermore, you need to prove that you've actually donated the money or items in question to take a tax exemption. Simply pledging to donate something does not qualify you for a tax exemption.

You must keep detailed records of all donations. If you are donating cash, you must have a record of the name of the charity to which you're donating, the date the donation was made and the value of the donation. If you are donating property, you must keep a record of its market value and keep any written acknowledgement of the donation on record. If the property is worth more than $5,000, you must have it appraised and keep the results of appraisal on record. Finally, if you canceled any checks while donating, you must keep copies of them on record as well. 

Finding Tax-Exempt Charities

To be able to write off a donation, you must donate to a charity with 501(c)(3) tax-exempt status. You can also donate to churches and religious organizations that are recognized as tax-exempt by the Internal Revenue Service (IRS). The IRS maintains a list of eligible organizations, updating it every tax year. You can get it by downloading "Publication 87" from the IRS website.

Filling Out the Tax Forms

Once you figure out what you will be able to write off, you should fill out your tax return. This can be a bit tricky. If you make even one mistake, your tax-exempt donations may not count as such. If you have any questions about how to fill out a tax return, consult a professional tax preparer.

The tax-exempt donation information goes into Schedule A of your tax return. Be sure to use itemized deductions. Keep in mind that there are limits to how much you can deduct per tax year. If the value of your tax exempt donation exceeds this, you can carry over the excess value to the next tax year. You can keep doing that for up to 5 tax years.

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