You may choose to give money or donate property to charities. Your donations can be helpful for medical research, relief efforts after disasters, or on-going operations of organizations.
Before you donate money or goods to a charity, use this checklist to research the organization. Be certain that the organization is actually a legitimate charity. Several agencies and organizations offer tips, databases, and reports that help you evaluate the operations of charitable organizations:
The Internal Revenue Service offers tax tips for donors and an exempt organization database to determine if the charity is a 501(c)3 organization (the organization must have this number so you can deduct your donations on federal taxes).
The Better Business Bureau allows you to access comprehensive reports of many large charities, including charities’ governance, use of funds, and fundraising activities.
Types of Donations
Giving money to an organization is the most common charitable donation. Your money is often used for program efforts and helps the organization achieve its mission. Give a monetary donations, with a check or credit card, to protect you from scams and help with your record keeping.
Goods and Personal Property
Some charities accept non-cash donations, such as clothing and household items. If you donate these items, they must be in good (or better) condition. Maintain a list of the items you donated. Also, if you donate a cell phone or computer, make sure to erase all of your personal information, contacts, and sensitive information beforehand.
You can donate your car, truck, boat, or other vehicle to a charitable organization. The organization may give your donated vehicle to someone, use it for operations, or sell the vehicle at auction. If you donate a vehicle, keep in mind that you will need to transfer the title of the vehicle to the charity. Also, remove license plates and registration documents before you donate the car.
You may also give other types of items to charities:
The value of these items may require appraisals from experts, and can depend on offers to purchase the items, and the timing of the transfer from you to the organization.
You may be able to claim a deduction on your federal taxes if you donated to a 501(c)3 organization. In order to deduct your donations you must file an itemized federal tax return, along with Schedule A and a form 8283 for your non-cash donations.
The amount of money that you can deduct on your taxes may not be equal to the total amount of your donations. If you donate non-cash items, you can claim the fair market value of the items on your taxes.
If you donated a vehicle, the amount of your deduction depends on if the car is used by the organization or sold at an auction. The IRS’s publication “A Donor’s Guide to Vehicle Donation” explains how your deduction is determined and the documents you must have to claim a deduction.
If you donated money to the charity and you received a gift in exchange, or if part of your contribution paid for a dinner, event entrance, or registration in a race, the entire amount is not tax deductible. Rather, the only part of your donation that you can deduct on your federal income taxes is the amount that is in excess of the value of the gift, dinner, or race.
Keep records of your donations to charities. You may not have to send these documents with your tax returns, but these documents are good to include with your other tax records. Some common documents include:
Canceled check to the organization
Credit card statement showing a payment to the organization
Receipt from the organization
Annual giving statement from the charity or non-profit
Vehicle identification number for vehicle donations
Signed over vehicle title
Phone bill, if you gave a donation through a text message
Valuations of stocks, real estate, art, or jewelry donated to a charity
There are some pieces of information that may be included in receipts and giving statements:
Name of the organization
Date of the donation
Amount of the donation
Statement that no goods or services were provided by the charity in return for your donation (if that was the case)
Vehicle identification number (VIN) for vehicle donations
Federal Tax Deductions for Small Business Charitable Donations
Small businesses and individuals generally have the same requirements when filing to receive a tax deduction for charitable giving. However, there are some important issues companies should know about.
Many small businesses donate to charity in some form each year. Giving to a charitable cause is not only good for society, it can also be good for business.
Reasons Businesses Donate
Small businesses decide to support charitable causes for a variety of reasons:
Help society - Businesses can use their size and influence to make a significant impact in a community, or on behalf of a cause.
Increase customer satisfaction or brand awareness - Businesses can set themselves apart from the competition and become more likable and recognizable by publicly supporting a cause. Some businesses even choose to involve customers in their charitable campaigns, or support nonprofit organizations with missions that are relevant to the company’s product or service. For example, a technology firm may partner with a charity that teaches computer skills to underprivileged students.
Employee retention and satisfaction - Businesses can improve employee morale and create a more positive company culture by mobilizing in support of a cause. Some companies allow employees to nominate charities to partner with, or choose the way the company donates.
Types of Donations
Businesses can donate to a charitable cause in many ways:
Money - Write a check, set aside a portion of revenue from sales, or collect donations from employees. Some companies may also offer to match employee donations, or choose to develop a specific product or service and donate the profits from its sale.
Inventory - Give merchandise or products like food, clothing, toiletries, furniture, or building materials.
Events - Organize food, clothing, supply, or blood drives. Companies can also sponsor sports teams, athletic competitions, arts productions, community projects, and fundraisers.
Volunteer - Work for free. Nonprofit organizations may need tutors, drivers, servers, or warehouse staff, for example. Companies can schedule a time for employees to volunteer together or encourage staff to sign up in their free time. Some businesses may choose to offer paid time off for volunteering.
Services - Donate professional skills. Nonprofit organizations may need help in the legal, policy, medical, dental, counseling, finance, technology, or administrative fields, among others. For example, beauticians may coordinate with a women’s shelter to style hair or give manicures, and artists may work with a community center to lead a children’s craft.
Time - Establish a leave-based donation program. This allows employees to forego their paid leave days in exchange for the company making a monetary donation to a charity.