Friday, March 18, 2016

Tips to maximize your tax savings!


As April 18 quickly approaches, many of us will be rushing around to get last minute paperwork in order for dreaded tax day. All year long, you have worked hard to hopefully get a little something back, but what do you do about all the charitable donations you made? Knowing what you can and cannot claim can be a confusing process. Often times, being misinformed can lead to no tax savings at all. Here at Charity Navigator, we put together a comprehensive list to help guide you through the technical process and put your mind at ease this tax season.

The first tip, and most commonly forgotten, is making sure to document all cash donations. The IRS requires proof of all cash donations and a canceled check, statement or receipt from the receiving organization will do just fine. Donating online via Charity Navigator's Giving Basket helps you fulfill this requirement since all your giving records will be stored in one place. Second, monetary gifts of $250 or more require additional documentation. In this case, you must prove to the IRS that you made the donation and did not receive anything in return. Obtaining a receipt with the charity name, value of the gift and date, along with a statement saying you did not receive goods in return will work fine in this case.

The third tip, and a bit complex, is to be careful when valuing a donated car. Back in 2005, a law was put in place to monitor taxpayers who were overvaluing their donated cars. Due to the overvaluing, the IRS continues to take a closer look at these deductions. If you donated a car worth more than $500, you can only deduct the amount the charity received from the sale of your car.  The fourth tip, and maybe most abused, is making sure donated clothing and household items are in good condition. The exception here, is if you donate clothing or a household item worth more than $500, you can claim a deduction, regardless of its condition, as long as you submit a qualified appraisal with your tax return. Keep in mind, the above tips will only be helpful if the following actions have been taken: you itemized, meaning that your total deductions were greater than the standard deduction; you donated to a qualified 501(c)(3) charity and your gift was made on time. As long as your donation was in by December 31, but you made a payment to your credit card company the following year, you still qualify.

As this tax season winds down, be aware of what you can and cannot claim ahead of time to ensure you are maximizing your potential tax savings!

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