by Charlie Clarr
Beware! Many people may be inclined to directly help a particular family affected by a tragedy or natural disaster. God bless you for doing this but such contributions are not deductible.
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Americans have been generous not only with their love but also their money. As is appropriate, most people have given little, if any, thought to the tax consequences of their generosity. In fact, knowing about the rules related to charitable giving may help you be more generous right now than you otherwise might be.
Under current law, charitable contributions are deductible only if you itemize deductions (Schedule A) in your tax return. If you use the standard deduction, then you don't receive any tax benefit.
Congress, however, may provide a limited charitable deduction for those of you who don't itemize. In fact, the House has already passed such a bill.
If you do itemize, the amount of your contribution that is deductible depends on the type of donation you make and to whom the gift is made.
For cash contributions, putting some cash in the collection basket at church or writing a large check to some type of relief organization are generally fully deductible, assuming you itemize.
Only donations made to 'qualified' charitable organizations are eligible for a deduction. Most non-profit groups need IRS approval to be qualified to receive tax deductible donations. This is necessary for you to deduct your cash gifts.
The IRS is speeding up the processing of requests for tax exempt status for new charities formed to assist relief efforts. Make sure that newly formed groups have received such IRS approval before you give.
To verify whether a particular organization is qualified to accept tax-deductible contributions you can search for them at IRS Exempt Organizations Select Check.
Next week, more on the deductibility of other kinds of contributions, like property and investments and time spent volunteering.
As always, PLEASE make sure you read and understand the fine print.
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Read Part TwoReturn to Budgeting Article Index
Copyright 2001 by Charlie Clar. All rights reserved.
