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The holiday season is the most common time of year for individuals to give to charities. In fact, according to statistics from nonprofitssource.com, roughly 30% of all charitable giving during the year is done in the month of December. If you’re one of the many individuals who chooses to donate to charities this holiday season, here are a few things that you should know.

Always Vet Them First

First and foremost, it is extremely important that you ensure you are actually giving to a charitable organization. If you’ve never given to this particular charity before, do some research to ensure that you’re giving to a legitimate cause. There are far too many people out there who are willing to take advantage of the giving spirit of the holidays, and will run scams to collect donations from those who are trying to do a little good for the world.

Additionally, take the time to figure out just how much of your donation will actually be going to a charitable cause. There are many organizations out there that are legitimate, widely recognized organization, but which only use a very small percentage of donations for actual charitable work; the majority goes to advertising costs, salaries for the higher-ups in the organization, and other expenses. Make sure you’re doing the most good possible for every dollar you donate.

Not Everything Is Deductible

In addition to being the season of giving, many people choose to make charitable donations in December because it is a good, last-minute way to get a tax write-off and reduce their tax liability for the year. If you’re keeping this in mind with your charitable donations, it’s important to be aware that not all donations to all fundraising efforts are going to be deductible. Here’s a quick list of some common causes people donate to that are not actually eligible for a tax deduction:

• Donations to GoFundMe projects or other crowdfunding efforts
• Tuition payments for another individual
• Any donations made to a for-profit organization
• Dues or membership fees paid to country clubs, HOAs, lodges, etc.
• Donations to an individual or family (e.g., secret Santa gifts)

Some common types of organizations that you can, most often, deduct donations for include:

• Local, state, and federal governments, so long as the donation is made for the purpose of benefiting the public (e.g., to build a new public park)
• Churches, temples, synagogues, and other religious organizations
• Nonprofit schools
• Nonprofit hospitals
• War veterans’ groups
• Any other certified charity group (e.g., Goodwill, Salvation Army, American Red Cross, etc.)

When in doubt, it is always best to check and see if the organization you’re donating to is a qualifying non-profit organization if you hope to claim it as a tax deduction.

Non-Cash Donations

It is not only cash donations that are deductible. So, if you’re giving back in some other way this holiday season, keep in mind that the following non-cash contributions can be deductible as well:

• Costs incurred when volunteering. This may include gas and mileage accrued when driving to and from the place at which you’re volunteering your time, as well as the cost of any materials or goods purchased to perform the volunteer work (so long as you’re not reimbursed for those expenses). Please note, however, that you cannot deduct the approximate value of your own time on a tax return.
• Value of physical goods donated. If you’re giving physical objects to an organization like Goodwill, Toys for Tots, or the Salvation Army, you can deduct the approximate value of the items you’ve donated. Just make sure you get a donation receipt when dropping off your items, if possible; if not, keep a thorough personal record of the items donated and their approximate values.
• Value of stocks. Did you know you can actually donate stocks you have previously purchased to a charitable organization? Doing so is a bit complicated, so we recommend that you speak to one of our CPAs if you’re doing this.

Receipts and Records Are Vital

Finally, if you’re hoping to deduct your holiday giving on your tax return, please remember that you should have thorough records and, whenever possible, receipts for those donations. While you may be able to file your return without that documentation, if you are audited and do not have the proper paperwork to prove your donation, you will lose that deduction and be asked to send an additional payment to the IRS.

For assistance in handling all these deductions on your tax return, please reach out to us and schedule an appointment with one of our CPAs today.