Charitable organizations rely on the generosity of sources ranging from grants and bequests to personal donations. However, when it comes to tax time, individuals and businesses will want to be able to deduct those contributions. Child, animal and veteran’s organizations are three of the most popular choices for charitable donations. They range from small, local organizations to those based in the U.S. with global reach.
There are thousands of deserving and qualified organizations to which donations can be made, provided it qualifies under IRS rules as a tax-exempt organization as defined by section 501(c)(3). However, it’s important to know that an organization can have non-profit status, without meeting the 501(c)(3) specifications. That distinction is the difference in whether a contribution can be claimed on income taxes.
A major consideration is if the funds will be used generally or specifically. For instance, people can make a donation to a cemetery and it will be tax deductible if the money will be used for general upkeep and maintenance for the entire cemetery rather than a specific gravesite or mausoleum. If the individual received something in return for their donation, such as tickets, merchandise, or a dinner, it won’t be fully deductible.
Contributions to organizations such as the Red Cross and Salvation Army are tax deductible, but not when designated for a specific individual or family. Donations are tax deductible for museums, non-profit educational agencies, and for some religious organizations. Donations to volunteer fire departments and organizations that maintain public parks are also tax deductible, as are private foundations. Many animal shelters and organizations hold 501(c)(3) status.
Use Caution
Holidays and natural disasters are always prime opportunities for scammers to seek donations. There are numerous legitimate organizations that accept monetary contributions. It’s up to each individual or business to ascertain if the organization meets 501(c)(3) qualifications if they want to claim their contribution on their taxes.
It’s also a good idea to ask how much of the contribution will actually go toward the organization for the maximum good. Many people are surprised to learn that a scant 10 percent actually goes toward the organization. The IRS has an exempt organizations tool to help individuals and businesses identify qualifying organizations.
At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs. We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!