The busy holiday season is upon is, and most likely your income taxes are the last thing you want to think about right now. That can wait until March or April! But unfortunately that’s not entirely true. While there is certainly no need to start working on your return right now, you should take a moment to think about which deductions and credits you might want to claim in the spring. To be eligible for most of them, you need to take action before December 31.
In particular, you might be planning to claim a deduction for charitable contributions. There is certainly no shortage of charities asking for donations right now, but you want to be smart about those contributions, too.
Check up on the charity. Unfortunately, quite a few con artists set up fake charities at this time of year, to take advantage of holiday cheer and generosity. Since donations to non-qualified charities can’t be counted as a tax deduction, research organizations using the IRS search tool before writing a check.
Value donations correctly. If you receive items in exchange for your charitable contribution, you must deduct the value of that item from the total amount. For example, let’s assume you donate 500 dollars to your favorite charity, and you receive a gift worth 100 dollars. The correct amount of your deduction is 400 dollars.
Second, remember that household goods must be counted at current market value, not the amount you originally paid for them. But if you donate an item that has appreciated in value, such as collectibles or antiques, you can certainly claim their new, higher value. Have items appraised, if you can.
Keep proof of your donations. If the IRS ever questions your return, you will probably lose your deduction if you can’t prove your donations. Copies of debit or credit card statements are good enough, but ask for a receipt for cash donations or household goods. Store these paper documents in a safe place, and consider taking a digital picture that you can store in a cloud system.
Work with a tax professional. Since tax deductions can become complicated issues, work closely with your tax professional to ensure that you’re claiming them correctly.