Monday, January 11, 2016

Making the Most of Charitable Deductions

One of the more popular end-of-the-year activities is to make charitable contributions. Donating to charity is a win/win: the donor may receive a tax deduction, and the charity collects much-needed funds. But charities need money year round, and you can ease your pocketbook in December if you spread your donations throughout the year.

Many charitable organizations allow, and in fact, encourage donors to set up recurring donations. You can have a designated amount automatically transferred from a bank account or charged to a credit card at a designated interval, such as monthly or quarterly. Recurring donations help charities better plan their programs, as well as allow you to budget your support for causes you care about.

In order to deduct charitable contributions on your tax return, you must file Schedule A of the 1040 form. The contributions must be to a qualified charity, such as a religious or government organization, or a nonprofit group with 501(c)(3) status. You must keep a record of what you've given; for example, a canceled check, a receipt from the organization, bank or credit card statement naming the organization, date, and amount.

Many charitable organizations desperately need volunteers as well as donations. If you do volunteer work, keep receipts for any unreimbursed out-of-pocket expenses you incur in the course of this work, as well as a log of mileage you've driven in your own vehicle on behalf of the charity. Don't worry if you forget to write down your mileage at each stop; fill in the gaps later with MapQuest or Google Maps. The important thing is to keep track of the date, destination, and purpose of the trip. If you volunteer regularly, these expenses add up, and tracking them will enable you to increase the amount of your charitable deductions on next year's tax return. Start today!

What charities do you support? What tips do you have for making the most of charitable deductions?

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