People give to charities for a number of reasons, but few do it solely for a tax deduction. Nonetheless, the charitable donation deduction is one of the most popular tax deductions offered by the federal government. Still, very few people understand exactly how they can save money on their taxes through charitable deductions.
There are several different ways to use charitable contributions to get a discount on their taxes. The most common method of getting a deduction is to make a donation of cash to a non-profit organization. When it comes time to file taxes, a taxpayer is able to subtract the amount of the donation from his or her total taxable income. The taxpayer only has to pay taxes on the remainder of his or her taxable income.
Donations of goods, and travel expenses can also be deductible. Labor deductions are next to impossible to take, since the IRS strictly forbids anyone deducting volunteer time from their taxes. Volunteers can use the calculators and formulas on the IRS website to calculate how much they are allowed to deduct for travel expenses related to volunteer work. The amount of the mileage compensation can be deducted just as a cash donation.
Donations of goods are a little trickier. At the current time, the IRS allows taxpayers to use an estimated fair-market value to determine the worth of goods that are donated. It should be noted that this is not equivalent to what was originally paid for an item. In fact, it is much more similar to the amount that could be received if the item was sold at a garage sale or flea market. There are several websites that can help taxpayers come up with an estimate of their donated items’ value. The equivalent value can be entered onto the tax form and deducted just as a cash donation would be deducted.
This deduction can only be taken under certain circumstances, however. First, the taxpayer has to choose to itemize his or her deductions. Typically, only taxpayers who have a lot of deductible items will choose to do this (www.fiscaltax.com). About one-quarter of Americans choose to take the standard deduction, negating the need to save receipts from their charitable contributions. Next, the charitable donation must be made to a qualified organization. In general, this means that the organization must have a non-profit tax ID number. Taxpayers are encouraged to ask for this number before making a donation.
It’s also important to realize that this is a deduction, not a credit. This means that the total amount of the donation can be subtracted from the total amount of taxable income earned by the taxpayer. Taxes are assessed on the remainder of the taxpayer’s net income. It is very important to realize that this is not the same as a credit. Tax credits are amount of money that are subtracted directly from the tax bill owed by the taxpayer.
Because charitable donations can only reduce the tax bill for people who have taxable income, this is not a useful deductions for people who do not have enough taxable income to offset by deductions. For example, many taxpayers are able to use other credits and deductions to reduce their tax bill to zero, making charitable tax deductions unnecessary.
Jennifer dances on poles and sports lingerie in her new movie.See her hot bod