The holiday season is here, which means your calendar may be full of family gatherings, office parties and celebrating with loved ones. You also may be eyeing the end of the year for tax and gifting purposes. These final weeks represent one of the peak charitable giving periods as many people look to take advantage of all possible deductions and also support their favorite causes.
You’re probably inclined to give because you want to support a good cause. However, you likely want to leverage available deductions, too. While gifting is fairly straightforward in many ways, there are a few wrinkles and subtleties that shouldn’t escape your attention. If you fail to plan properly, you may miss out on tax deductions, or your gift may not be used in the way you’d hoped.
Below are a few tips to consider as you plan your end-of-year giving. If you haven’t thought about these items, now may be the time to do so.
Make sure your charity is registered.
Not all charitable gifts are tax-deductible. In order for you to take a tax deduction, the organization must be registered as an eligible nonprofit. If your charity isn’t registered and you deduct the gift anyway, you may be exposing yourself to audit risk. To confirm your charity’s eligibility, you can contact the IRS and inquire about the organization’s nonprofit charitable status.
Your state may also offer tax deductions for charitable gifts. In some states, the charity must be registered with a government office, such as the state’s attorney general. Research your state’s eligibility rules before making your gift.
Remember to deduct your volunteering expenses.
You can’t deduct volunteer time or even time for donated services. However, you can often deduct expenses that you’ve incurred while volunteering for your charity. If you bought food for the charity staff, paid for administrative expenses or even racked up mileage on your car, you may be able to deduct those costs.
If you plan on volunteering, remember to keep receipts for any expenses you incur. Also remember to track mileage on your car. Finally, if you make a volunteer-related purchase, don’t mix it with a personal purchase. Try to keep those purchases separate so you can more easily identify deductions when you prepare your tax return.
Research your charity.
Tax deductions are nice, but the feeling of giving back to others is usually much more valuable. To that end, you likely don’t want your donation to go toward needless overhead. Rather, you probably want to see your gift impact your cause of choice.
You can use a wide range of websites to research charities and determine how effective the organization’s management may be. You may be able to see how much overhead the charity has and how much money ends up being used for its intended purpose. If your chosen organization has a poor record, you may want to look for an alternative charity that benefits a similar cause.
Ready to plan your charitable strategy for this holiday season? Let’s talk about it. Contact us at Gregory Financial Group. We welcome the opportunity to help you analyze your goals and develop a plan. Let’s connect soon.
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