As summer comes to a close, Mother Nature bestows on us not a breezy, leafy, pumpkin spice-scented day, but instead… a hurricane. Thanks a lot, Earth.
With Hurricane Michael clean-up just beginning for citizens in the South, many kind-hearted people are generously donating to restoration efforts. Perhaps you’re one of them. We applaud you. Charitable giving not only commences the holiday season on a good note, but inspires Uncle Sam to send good karma your way in the form of a tax deduction.
Don’t forget to read the fine print. Your donation is only qualified for tax write-offs if you give them to eligible organizations. They must receive the 501(c)(3) stamp from the IRS in order to be considered a “charitable organization” and qualify for a deduction.
Donating to your niece’s book club embarking on a mission trip to rebuild a Florida library is inarguably a worthy cause, but it will not qualify you for a write-off.
Let’s take a look at our lovely, tax-exempt bachelors, who do qualify:
- Churches, synagogues, temples, mosques and other religious organizations
- Federal, state and local governments, if your contribution is solely for public purposes, such as a gift to reduce the public debt or maintain a public park
- Nonprofit schools and hospitals
- The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys & Girls Clubs of America and other 501(c)(3) organizations.
- War veterans’ groups
- Expenses you paid for astudent living with you who is sponsored by a qualified organization
- Out-of-pocket expenses for serving as a volunteer for a qualified organization
Here are the organizations that do not qualify as charitable contributions on your tax return:
- Civic leagues, social and sports clubs, labor unions and chambers of commerce
- Foreign organizations, except certain Canadian, Israeli and Mexican charities
- Groups that are run for personal profit
- Groups that lobby for law changes
- Homeowners’ associations
- Political groups or candidates running for public office
- Cost of raffle, bingo or lottery tickets
- Dues, fees or bills you paid to country clubs, lodges, fraternal orders or similar groups
- Value of your time or services for volunteering
- Value of blood given to a blood banks
In addition to unqualified charities, the IRS warns unassuming taxpayers to be cautious of criminals who are attempting to capitalize off your munificence in the wake of a natural disaster. According to the IRS, this is how scammers can saunter their way into the lives of unassuming victims:
- Some impersonate charities to get money or private information from well-intentioned taxpayers.
- Bogus websites use names similar to legitimate charities to trick people to send money or provide personal financial information.
- They claim to be working for or on behalf of the IRS to help victims file casualty loss claims and get tax refunds.
- Others operate bogus charities and solicit money or financial information by telephone or email.
To ensure that you’re donating to legit charities and not the pizza fund of a 50-year-old guy living in his mom’s basement, check out the IRS search database: Tax Exempt Organization Search.
Upon sending your gift, be sure to keep a record of it. If an IRS auditor questions your donation (the nerve) and you don’t have documentation, you could lose the deduction. In 2007, Congress increased reporting requirements for charitable donation and granted the IRS the means to automatically reject undocumented contributions. In case anything should happen to physical documentation, be sure to scan all related documents into a digital folder. Don’t give the IRS a reason to steal your good karma.
In summary: Stay informed. Keep those receipts. Avoid sending cash. Keep doing your part in making the world a better place. We commend you for it.