Internal Revenue Service guidelines specify that donations made for the purposes of taking a tax deduction must be made to eligible exempt organizations. A searchable online database can be found at IRS.gov.
Lance Bradstreet, a partner at Bradstreet & Company of Dayton, said a lot of people don’t itemize tax deductions because the standard deduction is $27,700. He said taxpayers first have to decide which way, taking the standard deduction or itemized, would be the most advantageous in filing their annual tax return.
He said the last six weeks of the year are always busy helping their clients answering their questions. Bradstreet also provides his clients with a mock tax return in October to show his clients where they are with the government to help them with their decision-making.
Nakia Lipscomb, senior development director for the Dayton Foundation, said their busy season for donations starts around Thanksgiving and runs through the end of the year.
She said donation giving has increased this year because the stock market did well and people are looking to get good tax benefits.
Lipscomb said the foundation has opened 15 to 20 new funds per week during their busy season. In addition, many people visit their website to make a charitable donation before the year ends.
She said the Dayton Foundation manages more than 4,100 funds with $1.09 billion in assets. The community foundation was established in 1921 to help people distribute their giving in support of various charitable organizations in the Dayton region.
Lipscomb said since the standard deduction has been increased, there are many people who do not itemize their tax returns.
However, there are ways to make charitable donations to get some tax benefits. Among the various strategies are bunching and bundling, which are popular because they allow people to still donate to their favorite charities while gaining tax incentives.
Lipscomb said instead of making yearly gifts in the same amount, people may bunch together their gifts and make a major gift every two to three years. The major gift would be itemized for that year, and the standard tax deductions would be taken for the other years until a donor decides to make another major gift.
“This is a very popular practice,” she said. “We see a lot of donors take advantage of this strategy.”
She noted that donors could either give that major gift to the charity directly, or they could create a donor advised fund, which is being used more frequently because of its flexibility and immediate tax incentives.
Another option through the Dayton Foundation is a charitable checking account that enables donors to give online to charities of their choice, locally and around the world, and requires no minimum deposit or balance. She said this option was created in the 1980s and these accounts can be created online through their website.
Lipscomb said about half of the foundation’s 4,100 donors use this free checking account.
Thomas Seddon, president and CEO of the Warren County Foundation, said they are busy throughout the year and that giving is busier in December as people determine their donation options and tax situations. He said people are looking to donate to reduce their tax liabilities resulting from required minimum distributions from 401K and other retirement funds.
“A lot of individuals want to give back to the community and help people,” Seddon said. “People are very generous.”
The foundation was created 25 years ago to improve the quality of life in Warren County through charitable giving. The foundation manages more than 200 funds and has assets of $24 million. Seddon said 12 new funds were created this year and they have disbursed $2 million in gifts.
He said 80% to 85% of the grants stay in Warren County.
“We’ll be here all week to help people donate or establish a fund,” Seddon said.
John Guidugli, executive director of the Hamilton Community Foundation, said “it’s been quite busy in the last week as people make their giving decisions.”
“It seems busier this year,” he said. “The number of gifts and value are both up this year.”
Guidugli said a lot of people give because they want to give back to the community.
“Contributions have been up the last several years and that allows the foundation to provide more grants to give more money,” he said.
The largest community foundation in Butler County, the Hamilton Community Foundation manages more than 850 funds and has assets of $140 million, Guidugli said.
Document your charitable contributions
Keep track of your tax-deductible donations, no matter the amount. If you made a monetary contribution, qualifying documentation includes a bank statement, a credit card statement and a receipt from the charity (including date, amount and name of the organization) or a canceled check.
If you made a contribution as an automatic deduction from your paycheck through your employer, keep copies of your W-2 or pay stubs showing the amount and date of your donation.
You’ll need additional documentation in these circumstances:
- Cash or property donations worth more than $250: The IRS requires you to get a written letter of acknowledgment from the charity. It must include the amount of cash you donated, whether you received anything from the charity in exchange for your donation, and an estimate of the value of those goods and services. You must receive the letter of acknowledgment by the date you file your taxes for the year you made the contribution.
- If you deduct at least $500 worth of noncash donations: Fill out Form 8283 if you’ll deduct at least $500 in donated items. Additionally, you must attach an appraisal of your items to the form if they’re worth more than $5,000 total.
- Charitable donations won’t affect your taxes unless you itemize your deductions and they exceed the standard deduction (for tax year 2023, that’s $13,850 if filing as an individual or $27,700 if filing jointly as a couple).
- Personal property—like clothes, art, or stocks—that you donate to qualified organizations can be deducted for their market value at the time of the donation.
- When donating money or property exceeding more than $250, you must get a receipt or written acknowledgment as proof of the donation before you can claim it as a tax deduction. Organizations are required to provide a receipt for donations of $75 or more.
SOURCE: Nerd Wallet