There are only a few hours left this year to grab some money that may be sitting on your table. Uncle Sam offers deductions for donations made to qualifying charitable organizations, whether we donate cash or goods. To take advantage of these on your 2003 tax return, you need to make the contributions in 2003. Here are some things to consider:
- You can donate money. If you donate $250 or more to any charity, you'll need to get and keep a receipt for tax purposes. Also, realize that "tax-exempt" is not the same as "tax-deductible." A tax-exempt organization doesn't have to pay taxes, but donations to it may still not be tax-deductible. You can ask to see a copy of a charity's tax-exemption paperwork, and some proof that deductions are tax-deductible.
- You can donate stuff -- books, clothes, cars, computers, furniture, toys, George Foreman grills, and more. Just clear out your basement, garage, or closet and make a list of everything you're donating (perhaps to the Salvation Army or Goodwill or some similar outfit). Describe each item by type, condition, and quantity. Get a fair estimate of their values (and accept that it may not be close to what you paid for them) and sum it all up. Let's say the total is $800. If you're in the 28% tax bracket and can deduct this amount, you'll save $224 -- not bad, eh? Don't simply guess their fair value, though. Guess too high, and you run the risk of ticking off Uncle Sam, should he come snooping. Guess too low, and you're leaving money on the table. The folks at It'sDeductible.com can help you determine values (for a modest price). Learn more in IRS Publications 561 and 526.
- You can also donate stock. Here's an article by TMF Taxes with the details. (Note that the 20% tax rate for long-term capital gains has been lowered to 15% for many folks since the article was published.)
With all things tax-ish, there are rules and limitations. Make sure that you and your recipients meet Uncle Sam's requirements. To learn more, pop over to our Tax Strategies Center.
And finally, if you're interested in discovering worthy organizations that have been nominated and supported by many Fools, visit our Foolanthropy 2003 charity drive and consider joining us as we make the world a better place.