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Making a gift of cash or property can be a good way to save some money on your tax bill, as well as to do some good for a cause you believe in.
You can generally deduct contributions to or for the use of qualified charities that you made throughout the year, and in some cases you can deduct your out-of-pocket expenses incurred while donating your time to the charity. For small business owners, gifts made by your business should be deducted on Schedule A, not Schedule C.
Qualifying organizations. Not all organizations that solicit your funds qualify as charities, to which gifts are deductible. Generally, only the groups listed below can qualify:
- corporations, trusts, funds, foundations, or community chests organized and operated for charitable, religious, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals, or that foster national or international sports competitions; this includes churches, synagogues, temples, mosques and other religious institutions; nonprofit schools and hospitals; and groups like the Salvation Army, Red Cross, Goodwill Industries, Girl Scouts, medical research organizations, and nonprofit museums and cultural institutions.
- veterans' organizations
- domestic fraternal societies, orders, and associations operating under the lodge system, only if used for charitable purposes
- certain nonprofit cemetery companies or corporations, unless used for the care of a particular lot or crypt
- the United States, a state, possession, or any political subdivision of a state, possession, or an Indian tribal government
In most cases the charity must be a U.S. organization, but if you have Canadian income you may be able to deduct contributions to Canadian charities, and if you have income from sources in Mexico you may be able to deduct contributions to Mexican charities.
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Did You Know?
In 2001, based on the most recent data available, about 39.4 million taxpayers made deductible charitable contributions of about $139.2 billion in cash. In addition, 22.6 million taxpayers contributed and additional $38 billion in non-cash donations.
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If you're in doubt about whether a particular organization qualifies for tax-deductible contributions, ask them directly, or check IRS Publication 78, which lists most qualified organizations. You can also call the IRS at 1-800-TAX-1040 to find out.
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