Charitable Contributions

Charitable Contributions: Knowing What You Can and Cannot Claim

According to a preliminary analysis in 2010 done by the IRS, nearly 27 percent of filers take advantage of charitable tax deductions. However, many people are unaware of what is and is not eligible for this deduction. For example, many people are unaware of the fact that not all nonprofit organizations qualify for lower taxes. By knowing what you can and cannot claim as a charitable contribution, you can learn to maximize your potential tax savings.

You Can Deduct:

Contributions Made to Most American Charities: For a donation to an American organization to be deductible, the institution must be focused on charitable, scientific, literary, or educational purposes. These institutions go so far as to include war veteran organizations, cemetery companies, and others.
Donations to Some Foreign Charities: There are some cases in which a donation to a Canadian or Mexican charity is deductible. In order to deduct your contribution to a Canadian charity, it is generally required that you have some income from a source in Canada. Likewise, to deduct a contribution to a Mexican charity, you must have some source of income from Mexico.
Donations Made to Religious Organizations: Donations made to a church, synagogue, or other religious organization are most-often deductible.
Contributions to Many Non-Profit Institutions: These organizations include the American Red-Cross and United Way, hospitals, volunteer fire companies, public parks and recreation facilities, etc.

You Cannot Deduct:

Contributions Made to Non-Registered Groups: If a charitable organization has not registered with the IRS for the section of law that applies to it, your donations made to that organization are not deductible.
Pledged Donations: Until you have actually paid the promised donations, those contributions are non-deductible.
All Fund-Raising Tickets: Make sure that the cause you are donating to is sponsored by a 501(c)(3) organization like the Red Cross or Salvation Army before making a contribution.
A Check that is Dated in the Next Tax Year: Even if you send the check by the end of the year, if the post-dated check falls after December 31, it is non-deductible for the previous tax year.
Donations to Political Candidates or Committees: Donations made to the advertising or fund-raising events of a political party or committee are not tax-deductible.

Remember that the IRS requires proof of all donations, both cash and non-cash. Proof can include a canceled check, receipt, or statement from the organization. Make sure to write down dates, canceled check numbers, amounts, and other important details. Filing for and proving charitable tax- deductions can be a complicated process, so it’s in your best interest to contact a CPA in NYC if you have questions or would like to consult with a small business accountant throughout the process. Please contact Armel Tax and Accounting Services if you have questions about charitable tax-deductions or any other accounting needs at 646-699-4818, or info@armeltax.com.