Charitable donations are on the rise with more and more Americans giving to charity. While you may not donate to charity just for the potential tax deduction, it can be a bonus. You should always try to donate in a tax-efficient way.
Here are a few helpful hints regarding charitable gifts:
Know who you are donating to: Only donate to organizations with tax-exempt 501(c)(3) status. These are the only deductions that are deductible on your tax return. Before you donate to a charity check to verify its 501(c)(3) status. You can research tax-exempt organizations on the National Center for Charitable Statistics website.
Avoid capital-gains tax-Taxpayers can avoid paying the capital-gains tax by deducting contributions of various kinds of property. It should be noted that physical property worth more than $5,000 will need an appraisal of its value to claim the deduction.
Give it to the kids. Taxpayers can gift up to $14,000 annually tax-free. A gift to your child can be an easy way to reduce your income and tax bite. The gift recipient is liable for tax on any gifts.
While paying taxes is inevitable, giving to charity may help reduce what you need to donate to Uncle Sam.