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Christmas time often inspires many taxpayers to donate than any other time of year. Charitable donations are often deductible when filing tax returns and can provide you with more money back for your refund. However, if you are expecting an itemized deduction, you should know that there are limitations for qualified contributions.
What are qualified organizations?
The organization that you have chosen must qualify under section 170( c ) of the IRS code for you to file an itemized deduction.
Qualified entities include:
1. A state, possession of the US, the US, or the District of Colombia.
2. A corporation, community chest, foundation, fund, trust, organized or created in the US and operated exclusively for charitable, religious, educational, scientific purposes, cruelty prevention, or literary purposes.
3. A religious organization (church, synagogue, etc.)
4. Nonprofit volunteer fire company
5. Local, federal, or state law created civil defense organization
6. War veterans’ organization or its auxiliary, post, trust, or foundation
7. Domestic fraternal society operating under the lodge system (the donation must be used exclusively for charity)
8. Nonprofit cemetery (funds must be used for the care of the cemetery as a whole)
What are deduction limitations?
You can deduct up to 50% of your gross income from charitable contributions. Donations to organizations for veterans, cemeteries, fraternal societies, and some private foundations are limited to 30% of your adjusted gross income. You can utilize the IRS Tax Exempt Organization Search to indicate the limitations of your charitable deduction.
The importance of correctly filing deductions
When you choose to utilize deductions, whether, for charitable donations or work-related expenses, it’s important to only file deductions that you qualify for. This may sound like common sense, but selecting deductions that you don’t qualify for can result in a penalty from the IRS. Owing the IRS is more trouble than what it’s worth, so if you’re unsure about which deductions you qualify for, it’s best to ask a tax professional.
Did you make a mistake while filing?
Mistakes and errors happen, but tax debt will accumulate and pile up. The "Great News" is there are IRS problem solvers available to assist you. Flat Fee Tax Relief always offers a free consultation for tax debt relief at (866) 747-7435.