For those of you who are in a habit of donating regularly, we have got some exciting news that can benefit you enormously. You can save by donating! Sounds illogical, right? Well, what if we told you that you can lower your gross income tax by as much as 60% by donating? For those of you who are gaping at the screen, this discussion might just be the thing that you need to read today. Without any further beating about the bush, let us acquaint you with the term tax deductible donation.
What comes to your mind when you think of the term? It means exactly what you are thinking. This is the monetary contribution that you made to a charity, but the one that will bring down your net tax number by a good percentage. How are you are going to claim a tax deductible donation is the next question that you should be asking. Well, you will have to itemize your charitable donations, here itemize means listing your expenses. We will talk about the prerequisites, a bit later in this discussion. But we hope you are beginning to realize the benefits you can reap from this little offer by the USA IRS.
We know we used the word monetary earlier when we were defining the term tax deductible donations. That must have had some of you thinking about cash donations only. However, please note that these donations do not have to be in form of cash only. Goods that you might have donated to a local charity near your house also count, provided that the charity fulfils the required criterion as well. Some of you will be surprised to know this, but even your voluntary work is entertained by the IRS, whatever expenses that were involved in your volunteering work amount to tax deductible donations.
What you can and cannot?
There are a few key points that every taxpayer has to keep in mind, whenever the subject of tax deductible donations is under discussion. You can itemize only the cash/goods worth that cash given in a charitable cause, there is no compensation on the resources like time. Secondly, in the case of volunteering work, you can itemize your expenses spent directly on the cause. You cannot confuse the items on the agenda with your personal expenses. Also, not every organization qualifies for tax deductible donations, only a few do. We talk about these in a moment, so make sure you read the following sections of this discussion with attention as well.
The question of how much
It is a variable number. Oh, but we are not going to leave you wondering about things like that, no. You can benefit yourself by as much as 60%, but that is a number that is influenced by a lot of factors. How much did you donate and to whom you donated are the questions that are of significance? But if you are looking for an answer in dollars and not in percentages, you can benefit by as much as $300 in the year 2020[i]. And one can hope that the numbers will only get better in the coming years or so. Now that will influence people to pay taxes alright if that happens!
Prerequisites that you need to take care of
How can you save tax by donation? Well, by filling out a form provided by the IRS called Schedule-A-of IRS Form 1040. This piece of paper is going to help you itemize your deductions for the year 2020 and onwards. But that is not all that you have to provide. Other documentary proofs that you might be asked to provide include your bank statement, credit card statement, and of course, the most important piece of paper, donation receipts.
Just a few points that you need to be careful of. First, don’t manipulate the numbers. You helped someone and the reward is yours. But if you try to be too smart with the system, IRS will get you. Secondly, make sure that the organizations you applied to are indeed 501 (c) (3) organizations. Not familiar with the term? No worries. Briefly put, these are the non-profits and institutes which are exempt from tax[ii]. Only the donations given to such organizations are considered tax-deductible organizations. Red Cross is one such organization.
Looking for a 501 (c) (3) organization? Look no further!
If you are at sea as far as the tax-exempt charities are concerned, we can save you the trouble. One organization that you can consider is the USA registered nonprofit Transparent Hands, the very NGO whose website are you on right now! Don’t know much about Transparent Hands? Let us introduce.
Transparent Hands is the largest technological platform for crowdfunding in the healthcare sector of Pakistan. It offers a complete range of free healthcare services including medical and surgical treatments, medical camps, and telehealth facilities to the underprivileged community of Pakistan. The platform provides visibility to underprivileged patients and builds a personal and trusted bond between patients and donors while ensuring complete transparency. It also sets up free medical camps in the rural areas of Pakistan in which, free medical consultation, free medicines, and free diagnostic tests are provided to deserving patients. Donors from all over the world can use the Transparent Hands crowdfunding web portal and donate through 100% secure payment modes. They could select any patient, fund the treatment, and receive regular feedback and updates until the patient has recovered completely.
Giving matters. No matter how big or small your donation is, it can make a difference. And with the tax-deductible donations coming into play, donations can make a difference to your gross income tax as well. Well folks, time to wrap up things from this discussion. Hopefully, you learned something new about the US charity and IRS correlation from this discussion. But more importantly, we do hope that this discussion inspired you to donate more in the coming months. And on that optimistic note, we bid you farewell from this discussion.