Many Americans are unaware of the tax benefits of charitable donations. In addition to the help that it provides to those in need, charitable donations can also be worked into a smart financial plan. Use the following recommendations to get the most out of your clothing donations and financial donations.
Always get a donation receipt
As long as you donate to a tax exempt 501C3 approved charity organization, you should receive a donation receipt. This receipt is for your own records and will help you claim the appropriate value of charitable donations. Most clothing drop off locations will give you a blank donation receipt with smaller donations. They trust you to fill in the estimated value, as long as the estimated value is below $500. If the donated value exceeds $500 however, you might need an appraisal. The IRS requires a qualified appraisal to be submitted with your tax return if you donate any single clothing or household item that is not in good used condition or better, and for which you deducted more than $500.
Accurately estimate the value of charitable donations
It may be tempting to overestimate the value of charitable donations underneath $500. However, most charitable clothing donations cannot be claimed for the full purchase price. Even if you donate a piece of clothing that has never been worn, it is still considered used. Always provide an accurate estimate of the value of the charitable donation to avoid tax audits or problems with the IRS. You are also more likely to have IRS problems if you attempt to donate to a non approved charitable organization. Smart givers only support groups granted tax exempt status under section 501C3 of the Internal Revenue Code.
Support charitable organizations with sales
While clothing charitable donations can give you tax breaks come tax season, you can also cut your spending by shopping at local charitable organization sales. Some of the donated items go directly to those in need, while other items are sold for profits to help in other, needed ways. You can get a lot of good deals on things like appliances, furniture, and clothing, without breaking the bank. It is also a win win situation. You are getting the items you need or want at a discounted price, while also helping out by further supporting the charitable organization.
Remember cash is needed too
A lot of people donate their unused or unwanted items to local charities, but very few actually donate cash. Money is needed to help with housing, medical care, and job skills. You can receive the same tax benefits from donating cash, as you do with clothing or household donations. Just keep in mind, any charitable donation worth more than $250 (including donations of clothing and household items) will require a receipt to write off on your taxes. Enough donations throughout the year can significantly reduce your tax liability come tax season.
When in doubt, ask a tax professional
Taxes can get tricky and complex, especially when there are numerous writes offs and deductions to take into account. If you are struggling to come up with donation receipts or never received receipts from clothing drop off locations or pick up clothing donations services, work with your tax professional. Tax accountants understand the specific rules and regulations when it comes to tax deductions. They can also help you obtain missing donation receipts.
Local charitable organizations rely on you to donate clothes, household items, and cash donations to help those in the community. Fortunately, people are encouraged to donate with tax incentives. If you are going to donate for the tax benefits, just remember to get a receipt and to accurately estimate the value of charitable donations. Keep careful records all year long and work with a tax professional on properly claiming the charitable deductions.