The year is almost over, but there’s still time to make a donation this year and deduct from your 2012 taxes. Tax-deductible donations effectively reduce your annual taxable income, increasing your return in April, or lowering the amount you owe to the IRS. You can think of it as doing good for your community now, and getting an unexpected return in April.
How do tax deductible donations work, exactly?
Well, the total amount of money you donate to a 501(c)(3) charitable organization is deducted from your total taxable income. So essentially, if you are in the 25% tax bracket, you would save $250 on a $1,000 tax deductible donation.
Tax deductible donations are claimed on Form 1040, Schedule A, under the Gifts to Charity section. When you make a donation to Twin Cities Habitat, we provide you with a written letter acknowledging the gift, as well as a receipt of the donation. You need to include a receipt of donation with all donations above $250. Donations exceeding $500 require you to fill out a Form 8283. For donations of any size, the IRS recommends keeping detailed personal records, which could be a check blank or bank statement, in the case of getting audited.
What about in-kind donations?
You can also claim a tax deduction on non-monetary donations, such as donated supplies to the Habitat Restore. The ReStore accepts items similar to those found in a home improvement store, including appliances. The ReStore provides donors with a receipt with the appraised value of their donation to file with their taxes. As with cash donations, a Form 8283 is required for donations valued over $500.
Note: This information is meant to be helpful in considering the potential benefits of making a tax deductible charity donation. For advice on your specific tax situation, you should consult your own tax adviser.