In our last post, we highlighted how you could stave off pesky penalties and interest in the event you are not able to pay your tax bill when it comes due. However, consumers want to avoid paying taxes; and the way to do so is to reduce one’s taxable income. Indeed, there are many exemptions and deductions to take advantage of. With this post, we will focus on deductions.
For the uninitiated, deductions are tallied together and subtracted to your taxable income in order to determine your total tax bill. The math is pretty simple: the more deductions you have, the lower your taxable income, and the lower your total tax will be.
Many people use charitable deductions to lower their taxable income. If you are donating items or money, you should make sure of the following:
Make sure you can donate the item – If you are donating clothes, they may have to be in mint condition or gently used. Cars and computers, however, can have some damage to them; as long as they are repairable.
Keep receipts for the items you donate– You probably know about the itemized deductions that you are allowed. However, if you are gifting items worth more than $250.00, maintaining written receipts is essential. You never know when you will be audited.
Only donate to qualified entities – This is arguably the most important thing to remember when donating. Religious groups, civil service organizations, and charities are obvious entities that qualify for tax exempt status .
If you have further questions about donations, an experienced tax attorney can help.