Rewards for Your Good Deeds

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Rewards for Your Good Deeds

By: Angelina Pyrkins

People who give to charity do so freely, without a tinge of "what's in it for me". But even the most earnest philanthropists will agree that a tax break can make the good feeling you get from giving, even better.

In the United States, all tax deductions should be itemized on your IRS Form 1040, Schedule A. Make sure that you ask for a receipt for every charitable donation that you make, and keep an itemized list. Your contributions to charitable organizations can eventually add up to a sizeable deduction.

Donating to charity is easy to do, but it does carry certain risks. The tax agencies will only grant tax deductions for contributions made to recognized organizations. Check to see if the organization is recognized by the tax agency before you make your donation. Look for the IRS Publication 78 for a full list of recognized charitable organizations. You can find this list at your local library, and it's also available online. Take the time to research, and be sure that your money is truly going to a worthy cause.

Tax benefits are not available on donations made to individuals, political leaders or political organizations. Further, you cannot claim a tax break for time spent raising money for organizations by holding raffles, bingo or any other games of chance.

It is possible to claim a tax deduction for a contribution of goods, merchandise or services. These types of donations, known as "gifts in kind", can be claimed at fair market value. If, for example, you choose to donate company stocks, you can claim the value of the donated stocks. The value is calculated as an average of the highest and lowest traded prices on the valuation date.

Donated vehicles can also net you a sizeable tax deduction. Automobiles, airplanes and boats can all be donated to charity in exchange for a tax break. The amount of the deduction will be based on the vehicle's resale value at the time of your donation, so be sure to have a proper appraisal before you donate. One important point to remember is that if the value of the vehicle exceeds $500 and the charity in turn sells the vehicle, the amount of your tax credit will be limited to the gross proceeds of the sale.

Your donation of personal and household items can also realize a tax break. The value of the item is based on the amount that you would receive if you sold it at a garage sale or flea market. In other words, if you have an antique desk that's valued at $500 at a second hand shop, you may be able to claim a tax credit of $500 should you choose to donate the desk to a recognized charity. Keep in mind that all charitable donations valued at over $250 require a proper receipt.

Whether you choose to donate cash or merchandise to your favorite charity, remember that only contributions made during the current tax year will qualify for a deduction. You cannot carry these amounts over to subsequent tax years, even if you have a credit card or bank account statement showing your contribution. The tax deduction is available only in the year that the donation was made.

Even if you don't expect to get anything in return for your goodwill, go ahead and keep a list of your charitable donations. The taxman will appreciate and reward your generosity.

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About The Author
Angelina Pyrkins is a writer for several Internet magazines, on home equity and family matter topics.
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