How to Tell If Your Donation to Charity Will Be Tax Deductible

Dollar bill under pile of candy canesAs we approach the holiday season, many people will be considering what charitable organizations they’d like to contribute to, and how much they’re going to give. Some people give to the same charities every year, while others may vary which causes they support. Still others may be considering making a significant donation for the very first time. Whichever situation you may be in, it’s important to consider whether or not your donation to any charity will be tax deductible. How can you tell if your donations are tax exempt? Keep reading to learn a few things to check before you donate.

Check That the Charity Is Legitimate

This is by far the most important thing you should check when giving to a new charity, regardless of how the donation may or may not impact your taxes. During the holidays, many charity scams tend to pop up in hopes of taking advantage of people’s generosity during the giving season. Many of these scams can appear very legitimate, so watch out for these red flags that will warn you of what they truly are:

  • Requesting donations via odd means – Scammers love to request payment via money order or gift cards, because these payment methods are extremely difficult to trace. If they request payments in this way, you can feel confident this is a scam, and not a charity.
  • They call at odd hours – Registered charities actually have a set of rules that they must follow when it comes to cold-calling potential donors. One of those rules is that they can’t call before 8:00am or after 9:00pm, so if you’re receiving calls requesting donations outside of these hours, those calls aren’t coming from a legitimate charity.
  • They use prerecorded messages – Another one of the rules that charities must follow when contacting you is that they can’t use robocalls. If you receive a call, and it’s a prerecorded message that’s requesting the donations from you, hang up.
  • They can’t tell you how your funds will be used – A genuine charity will be able to tell you how your donations are going to be used—and not just in a vague manner either. If you ask how your donation will be used, and their response is something nonspecific, like “to help the homeless,” this is a red flag. They should be able to provide you with specific details about how funds are used; for example, “Funds are used to rent discounted rooms at local hotels and motels to house the homeless during the winter months.” If you can’t get details, don’t donate.

Establishing that the charity you’re donating to is a legitimate one helps to protect you from being taken advantage of. However, it doesn’t guarantee that your contribution will be tax exempt. There are a few more things you’ll need to verify.

Check the IRS Registry for Tax-Exempt Organizations

In order to offer a tax deduction for donations to their cause, a charity must register with the IRS as a non-profit organization. Charities that receive tax-exempt status for their organizations are all viewable on the IRS’s public Tax Exempt Organization Registry. You can easy view this information on the IRS website to see if you’ll be able to deduct donations to that specific charity.

Keep in mind that donating to fundraising campaigns on websites like GoFundMe are not deductible on your tax return. While these may be legitimate causes, they are not registered non-profits, so you can’t deduct your contributions.

Check that You’re Donating the Right Things

Goods with a clear and measurable value are generally tax deductible. However, many people do try to deduct other types of donations on their tax returns, so it’s important to understand what is and is not deductible when it comes to your charitable endeavors. One common mistake people make is trying to deduct the time that they donate to various causes. Even if you are volunteering in a professional capacity, unfortunately, the hours you put into your charitable work aren’t deductible.

For example, let’s say that you’re a professional landscaper. An elementary school in your neighborhood is looking to put in a memorial garden, and you volunteer your professional services. While you could deduct any supplies you contribute to the project, the hours you put into landscaping that garden would not be deductible on your tax return.

Check that You’re Keeping Detailed Records

Finally, make sure that you’re keeping detailed records of all your charitable donations. This includes keeping copies of receipts for your donations, as well as details of any miles you may have driven for charity. If you need help organizing the documents for your charitable donations this year, or want to know how donating this holiday season will impact your 2022 tax return, contact Demian & Company CPAs today.