Dear Carrie, How can I figure out the tax benefit of my charitable contributions? --A Reader
Dear Reader, It feels great to give. It can feel even better if your gifts are tax deductible. The tax benefits can be particularly important for large donors who factor charitable giving into their overall financial plans. But even for individuals who have smaller amounts to give, the tax perks can be a nice plus.
However, your question is right on the mark, because the IRS has a variety of rules surrounding different types of giving -- from gifts of cash and property to volunteering.
First, you can only deduct charitable contributions if you itemize deductions. This eliminates the tax benefit for a lot of folks right off the bat. The standard deduction for tax year 2012 is $5,950 for singles, $11,900 for married filing jointly. In 2013, it goes up to $6,100 and $12,200 respectively. If you think your itemized deductions will exceed that amount, then see if your charitable donations pass these other IRS deductibility hurdles.
(SET BOLD) Are you giving to a qualified charitable organization? (END BOLD)
In general, an organization must be what the IRS has designated as a (SET ITAL) qualified (END ITAL) organization for your contribution to be tax deductible (for (SET ITAL) public charities (END ITAL) you can deduct up to 50 percent of your adjusted gross income; for (SET ITAL) private charities, (END ITAL) 30 percent). The charitable organizations you think of most often -- for example, churches, schools, hospitals, the American Red Cross or Boys and Girls Clubs of America -- are public charities. Private foundations, which generally support the work of public charitable organizations, are private charities. Donations to a political party or candidate, on the other hand, are not deductible.
Is your donation in an accepted form?
Whether or not your charitable contribution is fully tax deductible depends on its form. Here's a brief rundown of possible contributions.
--Cash -- This is usually fully deductible, up to 50 percent of your adjusted gross income.