End of year giving can reduce tax burden
Giving to others is its own reward, but a little incentive is a good thing.
With just a few days left in 2012, the time to make charitable donations eligible for deduction on income taxes grows short. Individuals can deduct contributions and other deductions from taxable income in certain circumstances.
According to IRS.gov, giving to qualifying organizations can decrease the amount of taxes you owe. Add those donations to the total amount of deductions you itemize on your yearly tax return. If the total exceeds the government's total standard deduction, you might owe less to Uncle Sam.
Such deductions are only available for federal income taxes, but there is an option for tax credits on North Carolina income tax returns. According to the N.C. Department of Revenue website, if you take the standard federal deduction and your charitable contributions were more than 2 percent of your income, you might be eligible for a tax credit. Depending on the total given, as much as 7 percent can be credited to the amount already paid.
There are some rules about what kind of charities recognized by the Internal Revenue Service. Each contribution must be itemized on a Schedule A for Form 1040. Deductions can be claimed on donations to legitimate organizations only, and not to individuals, political candidates or political organizations. If you receive something in return for your contributions, such as food or event tickets, its market value must be subtracted from the total amount you donated. If you donate clothes, household items or other objects, they must be in good condition to be considered. Money donations should be documented with bank records, canceled checks or some other proof.
Most of the time, charitable contributions can be claimed in itemized deductions without providing documentation. But if the IRS audits you, it will ask for proof.
"We recommend people pay with a check or a credit card. Never with cash," Better Business Bureau president Tom Bartholomy said.
Some scammers are using the year's end as a way to solicit money from donors. The N.C. Attorney General's office issued a warning to residents about telephone calls from groups asking for money for a good cause.
If you receive an email from a reputable charity asking for money, be careful following any links embedded in the email. Before following clicking on anything, Bartholomy advises hovering the mouse over the link. That way, you will be able to see exactly where it will take you. If it is not the legitimate charity's website, delete the email.
"We're seeing a lot of spoofs, websites set up to look like a charity's official site," Bartholomy said.
But plenty of good charities look to late December for financial windfalls, United Way of Central Carolinas director Richard Heins said. Generous people give all year long, but some see the wisdom in giving before the start of a new year.
And there is still plenty of time to contribute to a good charity, Heins said. The United Way contributes to 19 charities based in Union County.
"We're still in our annual campaign," Heins said. "We certainly could use the help."
For more information, talk to your accountant about the types of tax deductions you might be eligible for.