Donations to charity not only support your favorite causes or contribute to your friends and loved ones walks, runs, or other fundraising efforts, they’re also a tax deduction. If you donate a lot, or regularly, it can be a fairly significant tax break. However, in order to claim the tax deduction, you need to have the right documentation in the form of either a bank record or other written communication from the charitable organization for donations of any amount. For donations larger than $250, a written acknowledgement is necessary.
Things to Know about Written Acknowledgements
These acknowledgements are only required for donations of $250 or more. One acknowledgement can list each $250 donation in an itemized fashion, or the organization may provide you with a different acknowledgement for each $250 donation. However, if your total donations for the year to a single organization are more than $250, but each donation is less than that amount, a written acknowledgement is not necessary.
Keep in mind that donations made through payroll deductions are considered a separate donation each time. In addition, acknowledgements must be dated or accompanied by a bank record receipt that does show the date.
Keeping these receipts, letters of acknowledgement, and other documentation organized may seem overwhelming at first, but it’s well worth the time when you see how much you save on your taxes.
Organizing Your Charitable Deduction PaperworkDuring the year, it can be tempting to through all your tax deduction paperwork into a shoe box and deal with it later. Unfortunately, this only serves to create a mess you have to sort through later. Instead, consider using a more efficient organization system throughout the year to save yourself frustration later.
File folders, accordion files, and properly sorted filing cabinets are all great ways to approach organizing your charitable donation paperwork. Also, use staples to keep receipts and matching acknowledgement letters together. Paperclips can fall off or become entangled with other papers in the same file.
For more great tips like this, don’t forget to sign up for my newsletter.