Thursday, August 15, 2013

There are Tax Benefits on Charity Donations

You want your hard earned money go to something worthwhile? Investment is one, you will really benefit from it but giving something to charity can make you feel better.  And you primarily get the tax benefit from it. 

Federal government allows tax deductions emerging from your charitable contributions. Theoretically, you want to give lesser tax, give to charity!  But there are also limitations because the government barricades the security of the system for you not to abuse and end up tax free.  

For instance, only those charitable institutions recognized by the government are allowed. Not all contributions given to anybody of charity will qualify your donation for tax deductions. There are also rules and regulation that mandate how much of your contribution can be applied to your taxes. 

Furthermore, there are also amount limits to how much you can apply for tax reduction. Mostly will probably not reach the ceiling but for those that give 20% of their adjusted gross income they can only less up to 50% of their base contribution which will be 50% of their adjusted gross income.

In addition, there is the importance of documentation however you give your donation. Whichever the amount you donate, less than $250 or more you need to have a written document from the charitable institution stating your total donation along with your name, date and place where the money was donated.

The rule also applies if you bestowed non-cash items.  It is more difficult because you need to justify that the cost of goods is not over $5,000. You need to secure not only the acknowledgment letter from the charitable organization but also an appraiser's letter stating the real value of your donation.

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