How to Get the Greatest Tax Advantages by Donating Money to Charity
Since Hurricane Katrina hit the Gulf Coast, Americans have
donated $503 million in gifts and pledges to the American
Red Cross for the hurricane relief effort. More continues
to pour in each day, not only to the Red Cross but to other
relief organizations as well. These donations are of great
help and reassurance to the survivors, and, of course, this
is the primary reason for giving to charitable organizations.
However, as a donator you are entitled to certain tax advantages,
and if you don't know what they are, no one is likely to point
them out to you. Here are the basics you need to know.
You're generally allowed
to donate up to 50
percent of your adjusted
Which Charitable Donations are Tax Deductible?
Only donations to qualified organizations are deductible.
These include federal, state and local governments and organizations
organized and operated only for:
If you are unsure, the organization will be able to tell
you whether your donation qualifies for tax benefits. There
are some exceptions and rules to be aware of.
First, if you get merchandise, goods or services from your
contribution, you must subtract the fair market value of those
items from your deduction. For instance, if you buy a ticket
to a charity dinner for $150, and the dinner is worth $60,
you can only deduct $90. Also:
If you donate $250 or more, you must get a written receipt
in order to deduct it.
When claiming property donated to charitable organizations
(clothes, furniture, household items, etc.) you can only
deduct the price the item would sell for at a garage sale,
flea market or thrift store (not what you paid for it).
If your non-cash property donations exceed $5,000, an
appraisal is generally necessary for it to be claimed.
Qualified Organizations for
The following are some organizations recognized by
the Internal Revenue Service (IRS) as eligible to receive
tax-deductible charitable contributions, but there are
many, many more out there. For a complete list, see
the IRS' Publication 78.
- Alive on the Lakeshore (Muskegon, MI)
- American Living Memorial to the Holocaust
Museum of Jewish Heritage (New York, NY)
- Carmelo Parent Organization (Carmel, CA)
- Carmen Friends of the Library Inc. (Carmen,
- Children's Christmas Store (Saginaw, MI)
- Children's Circle of Hope Foundation (Mineola,
- Fairburn Community and Historical Society
- Florida Pollution Control Association Inc.
(Winter Park, FL)
- Impact Children Foundation (Chicago, IL)
- Animal Welfare Association (NJ)
- Animal Friends (PA)
- Angel Flight Central (MO)
- American Hospice Foundation (DC)
- Johns Hopkins University (MD)
- Lance Armstrong Foundation (TX)
- League for Animal Welfare (OH)
- National Prostate Cancer Coalition (DC)
- The Nature Conservancy (VA)
- The Sierra Club Foundation (CA)
What About Donating Your Car?
Since the American Jobs Creation Act of 2004, there are new
2005 rules for donating your car to a charitable organization.
First, the deduction you're allowed to take is limited to
the price the charity is able to sell your car for. And second,
you must get acknowledgement from the charity at the time
of the sale to claim the deduction.
However, you may deduct the vehicle's fair market value instead
The charity uses the vehicle in the interim (such as
using it to deliver meals on wheels).
The charity significantly improves the vehicle via major
repairs (more than just painting or cleaning).
The charity sells or donates the vehicle to a needy person
at a price significantly below market value in order to
help that person.
How Much Can You Deduct?
While you can donate as much as you want, you cannot deduct
unlimited amounts from your taxes. The amount you can deduct
is high enough, though, that most people won't need to worry.
Generally, when you file your taxes, donations cannot be
more than 50 percent of your adjusted gross income. There
are some exceptions when, depending on what you donate and
who you give it to, that limit is lowered to 20 percent or
If you do donate more than half of your adjusted gross income,
you can carry those excess deductions over for up to five
more tax years (the same limits will still apply to those
In order to claim any charitable deductions, you must itemize
your deductions, not just claim the standard deduction (as
most Americans do). The standard deductions are:
$4,850 for single or married filing separately taxpayers
$7,150 for heads of households
$9,700 for married couples who file joint returns
If you believe your deductions will exceed this amount, it's
definitely worthwhile to take the time to itemize.
Which Organizations Are NOT Tax Deductible?
There are some types of donations that cannot be deducted.
Donations to foreign organizations (a U.S. organization
must have control of the funds to be deductible).
Contributions to specific individuals, political organizations
The value of your time or services (while volunteering,
The cost of raffles, bingo or other games of chance.
Donations made to qualified organizations IF you expect
to receive a financial or economic benefit equal to the
contribution as a result.
While you cannot deduct the value of your time and services,
you CAN deduct expenses incurred while doing so. For instance,
if you volunteer at a homeless shelter and must take the bus
to get there, you could deduct the bus fare.
There are many organizations out there, and with a little
research you can determine the one that's best for you to
give to. The Council of Better Business Bureaus recommends
that a charity spend at least 50 percent of its total income
on its programs. The Red Cross, for instance, says that at
least 91 cents of every dollar donated for Hurricane Katrina
goes directly to assist disaster victims.
To see how your favorite charity stacks up, or to find a
new one, check out Charity
Navigator or the Better
Business Bureau for lists of top-rated charities across
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