Tax Deductible Contributions to 501(c)3 organizations
the season for making gifts to charity and you may have some questions about what makes your gift tax deductible. First, the disclosures: The Generous Giant is not a financial advisor, and cannot give any tax advice. Please see your financial advisor to determine what deductions you may or may not be able to take.
Even though I can't give tax advice, I can point you to some widely available information regarding charitable giving. Two frequently asked questions are "what is a 501(c)3 charitable organization?" and "How do I know if my donation is tax deductible?" We found the best answers to these questions on the official website of the Internal Revenue Service: IRS.gov and 501(c)3.0rg
What is a 501(c)3 organization? A 501(c)3 can represent a wide variety of entities each of whom maintain their existence according to a stated mission. Those missions can also range widely. In short: " an entity must be organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals."
And what makes a contribution to one of these types of entities tax deductible? Again, you'll need to check with your financial advisor on your own deductions, but here are some rules the IRS made available to you with a simple search of the IRS.gov website (this according to the latest update made September 12, 2012): To be deductible, charitable contributions must be made to qualified organizations. Payments to individuals are never deductible. SeePublication 526, Charitable Contributions.
There are some limits on how your contribution might be deducted, for example, if you receive something in exchange for your contribution, your total contribution may not be deductible. Your tax advisor will have the best answer for you, but here's the general rule: If your contribution entitles you to merchandise, goods, or services, including admission to a charity ball, banquet, theatrical performance, or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received..
There are some additional things you'll want to keep in mind. Keep a record of your monetary and non-monetary contributions, and be prepared to fill out some special forms to include with your itemized deductions.
All in all, deducting charitable contributions is not difficult, but there are some hard and fast rules that your financial advisor can help you navigate.