If you're among the minority of taxpayers who still itemize, year-end philanthropy is one of the easiest ways to boost your Schedule A deductions.
And much of that giving his happening right now.
Nonprofits Source, a digital marketing consultant for nonprofit groups, says an estimated 30 percent of annual giving occurs in December. Ten percent of those gifts are made in the last three days of the year.
If you're part of this last-minute giving group, here are some tips on getting your potentially tax-deductible donations to your favorite charities in time so they also can count on your 2022 tax return.
How to give: The most common way to support a nonprofit is by cash gifts. However, that doesn't mean literal currency.
In fact, you're better off not giving dollar bills unless you physically hand the money to your favorite charity and get an official receipt then and there for the cash gift.
Under U.S. tax rules, cash gifts also include checks, money orders, credit and debit card charges, and even text messaged donations. These giving methods are recommended since they provide you with a record of your donation, and we all know how much the Internal Revenue Service likes documentation.
When to give: The calendar year is the critical timeframe for individual taxpayers. Jan. 1 through Dec. 31 is the period that matters when it comes to income received, expenses paid, and, for this post's focus, donations made. That's why, as the data cited earlier, many of us are scrambling to get our gifts made now.
If your charity of choice is local, you can hand deliver your gift. But that's generally not the plan unless we're dropping off used clothing and household goods or an old vehicle.
Instead, most of us last-minute donors (yes, I am in that group) either write checks, call or text our charity's donation telephone line, or go online to give. Again, the timing of each of these cash donations is key, as the table below shows.
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How you're giving: |
Deadline to make the gift: |
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Mailing it via U.S. Postal Service |
The envelope's postmark is Dec. 31. If you're dropping it in a mailbox or slot at the post office, double check the pickup times. Better, take it to a post office clerk and get a receipt for your drop-off. If the 12/31 clock is ticking, you can get added timely donation proof by sending it registered or certified mail. |
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Donating by debit or credit card |
Your donation, either via the charity's website or calling its donation hotline, needs to appear as a transaction by Dec. 31 on your card or bank statement. Check, too, as to whether your charity provides an immediate receipt or confirmation of your online gift, either as an email or that you can download. I also like to save screenshots of my online donations as an immediate record. |
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Texting your donation |
Your smartphone donation by text should show up as a December transaction on your phone bill. Depending on your billing cycle, that statement could come in January or February. Some text gift recipients provide confirmation replies; in that case, save it. As with other electronic gifts, I also like to screenshot my text donations. |
Records you need to keep: Tax law says the 501(c)(3) organization, which is the IRS designation for a public charity, that gets your money must provide you with a receipt when your gift is $250 or more in cash or that value when it's a non-cash donation. Most charities are aware of this tax requirement.
Most charities also have systems that provide you with a receipt regardless of your donation amount. This usually is sent early in the next year, prior to the start of tax filing season.
You don't have to send a copy of the receipt with your tax filing when it comes to most relatively smaller donations. Just keep that verification, along with a copy of your check or other financial record showing your gift, in your records.
You can use them to prove your gift and validate your tax deduction if the IRS ever questions your generosity.
How much you can give: Obviously, you can give as much as you want and can afford. For tax deduction purposes, though, you can only write off gifts that are up to 60 percent of your adjusted gross income (AGI).
Don't feel bad if you're giving way less than that IRS maximum. That donation AGI limit usually is only neared by very wealthy donors.
If you're interested in how the rich give and where the most generous donors live, check out the data from the nonprofit research division at Blackbaud Institute, published by Smart Asset. Quasi-spoiler: Utah and Georgia metro areas dominate the top 10.
The rest of us, though, give what we can, and the charities appreciate any amount. That's especially true of smaller, more local nonprofits.
So if you want and can afford to give, donate the amount that works for your finances. And if you can claim the gift as a tax deduction, be sure to do that, too. You getting a benefit doesn't detract at all from your gift.
You can find more on the tax/philanthropy connection in my post 6 tax donation deduction tips for Giving Tuesday. You also might find these other year-end blog items of interest:
- 8 tax moves to make this December
- Tax situations where Dec. 31 really matters
- It's capital gains tax gain harvesting season
- Last-minute tips for those facing Dec. 31 retirement plan RMDs
Happy Holidays and New Year!
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