The holidays are an expensive time of year making one wonder if a purchase could be tax deductible. Unfortunately, when it comes to a new toy or video game for your child or the gift cards for your family, no tax deduction is available. However, giving to a charitable organization may be tax beneficial. As long as the gifts are given to a 501c(3) organization, the donations are deductible to the extent of the value you give exceeds the value you receive. If that’s confusing, hopefully these examples help explain it.
Example: If you donate $100 to your church and in exchange receive a ticket to a dinner valued at $30, your charitable donation is $70.
Example: You donate clothing or household goods to say Goodwill that cost you $500 but are worth $100, your potential tax deduction is $100.
For cash donations, it’s preferable to write a check so that you have the written proof of the donation. No donation greater than $250 is deductible unless you have a receipt from the charity sustaining the donation. Remember donations must be to charitable organizations, donations to individuals are not deductible. When in doubt, get a written receipt of your cash donation.
Noncash donations (clothing, etc.) are trickier and require you to keep accurate documentation. These items must be in good or 
better shape for the deduction to count. This rule was enacted to prevent people from donating worthless items and then claiming excessive values as tax deductions. When donating clothing or household items be sure to make a complete list and take pictures if possible. Your list should include when you bought the merchandise and an estimate of what you paid along with what the items are now worth. Not sure of the value now? Check Salvation Army, thrift stores, Amazon.com or ebay.com – all sources that sell used items can be a resource to determine the value to the charity.
Do you give your time during the holidays? That is wonderful! But unfortunately it is not deductible. Only actual out of pocket expenses to the charity are deductible.
As in any tax law there is always a “it depends”. You can give thousands of dollars but if you claim the standard deduction on your tax return, your charitable gifts will do you no tax good. You must itemize expenses on Schedule A to deduct charitable contributions. This is when an accountant can help you maximize your charitable deductions.
Please visit our website www.browncpa.net for more advice on contributing wisely under our financial guides tab along with other year end tax strategies. Brown and Associates are certified public accountants that provides outstanding service to our clients because of our dedication to the three underlying principles of professionalism, responsiveness and quality.
Scoop Tip: Besides donating to Good Will, Scoop has many charities that would love to have your gently used donations. Click here for some links to local places.
Brown & Associates, P.C
11175 Cicero Drive Suite 100
Alpharetta, GA, 30022
Phone: (770)980-9121
info@browncpa.net
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