In our last post, we highlighted a few of the new tax wrinkles that will apply during this year’s tax season. Even with those changes, the goal for many taxpayers is still the same: to reduce their taxable income as far as legally possible so that they can limit the taxes they need to pay, or to receive a refund.
Indeed, there are many exemptions and deductions to take advantage of to help taxpayers reach their goals. For those unfamiliar with the terminology, a deduction is an element that subtracts from your taxable income in order to determine your total tax bill. The more deductions you have, the lower your taxable income will eventually be, and the lower your total tax will be.
Charitable deductions are key in reducing taxable income, and many taxpayers use such donations. If you are donating items or money, consider the following before completing your tax forms:
Make sure you can actually donate the item – If you are donating clothes, they usually have to be in mint condition or gently used. Cars and computers, however, can have some miles on them or be slightly damaged. As long as they are repairable, they commonly can be donated.
Make sure to keep receipts – Most taxpayers know about when itemized deductions can be allowed. However, if you are gifting items worth more than $250.00, it is important to keep written receipts for the items you give away. They will come in handy in the event of an audit
Donate only to qualified entities – Probably the most important thing to remember when making charitable donations is to limit gifts to religious groups, civil service organizations, and charities that have tax exempt status.