'Tis the season for giving to family, friends, loved ones and especially people in need.
Despite continued economic challenges, 2010 saw a 4 percent increase in charitable giving, according to a report by the Giving USA Foundation . The philanthropic research group claims the upward trend is expected to continue this year. While more people are giving to charities, many are unsure of how to properly record and claim charitable donations on tax returns. According to Parsippany-based Jackson Hewitt Tax Service Inc., incorrectly deducting charitable giving can result in taxpayers missing out on possibly larger refunds or chances to cut the amount of tax owed.
"It's always better to give than to receive, but it's also helpful to realize the tax benefits of a charitable act," said Mark A. Steber, Jackson Hewitt's chief tax officer. "Still, many taxpayers may be overpaying taxes every year by understating the value of their donations."
Charitable giving comes in many forms. Steber offers some helpful tips and advice on how to make and properly record charitable contributions and claim them on a 2011 tax return:
- Choose a qualified charitable organization - The Internal Revenue Service allows taxpayers to search for a qualified organization on its website, www.irs.gov. Qualified organizations offer several ways to make a tax-deductible contribution through a cash payment, check, credit card charge, or by making payroll deduction to a favorite charity.
- Keep a Written Record of Your Donation(s) - Keep records and receipts for all contributions regardless of the amount or value. Acceptable records include a receipt from the organization that states the date, name, address, location and amount of the donation; a cancelled check; or other bank documents that provide the same information.
- Get Fair Market Value for Non-Cash Donations - Claim the fair-market value of the clothing, toys, furniture, or other household items you donated to charity.
- Claim Out-of-Pocket Expenses for Volunteer Work - Give your time, not your money. Your drive to the soup kitchen or other local charitable organization is tax deductible. Out-of-pocket expenses for volunteer work include mileage or transportation costs related to charitable work, the cost of uniforms required while doing the volunteer work and any supplies needed. When claiming mileage, record the number of miles driven, the starting point and destination, the date and the organization's name.