Don’t forget to claim charitable donations

Don’t let your donations to Goodwill and other charitable contributions go to waste. While giving for the sake of giving is noble indeed, taking the allowed tax deductions for such donations makes good sense.

Just about anyone can claim a charitable donation as a tax deduction, as long as they itemize deductions — but is it worthwhile to deduct those donations?

That all depends on how much one donates. To claim a charitable donation deduction, the taxpayer’s total deductions — for charitable contributions and other items — must exceed the standard deduction, which varies according to filing status.

Donating gently used items to the local Goodwill or Salvation Army thrift stores is one of the easiest ways to make a charitable contribution — and those donations can really add up.

“Try to make a run to Goodwill or your favorite charity about once a month to drop off clothing, books, etc. that you’re not using,” said Eva Rosenberg, publisher of TaxMama.com. “The benefits are threefold: It will keep your house tidier, the charities will get newer things that can be sold more profitably and you’ll have lots of donation slips to use — and end up with a larger, legitimate deduction at year-end.”

Be sure to accurately record such donations to receive the maximum tax benefit.

“If you make a detailed list of the items you donate, your deduction will be much larger than if you just use a rule-of-thumb number, such as $25 to $30 per bag or box,” Rosenberg said.

To deduct the value of donations such as clothing, household items, books and electronics, taxpayers must establish the fair-market value of each item.

“If you need to look for current fair-market values, you can search online or in newspapers,” Rosenberg said. Taxpayers can also turn to software like “It’s Deductible,” which features fair-market values for thousands of items.

Donated cars and trucks are another popular deduction, but taxpayers must proceed with caution.

“Autos are a sensitive area,” Rosenberg said. “The deductions people have been taking for those donations are often totally out of line. If you donate a car that’s not working, the charity isn’t going to get much money for it — perhaps $100, if they’re lucky.

“Don’t deduct the $2,000 Blue Book value if the charity will only get a pittance,” she said. “If your car is in good condition, take photos or get a mechanic’s report to prove it. Then, do use the average Blue Book value and be sure to get a written receipt from the charity.”

Taxpayers may not be able to claim all of their donations, however.

“No charitable deduction is allowed for donations of services,” said Randi Schuster, chairperson of the Family Wealth Planning Group at BDO Seidman LLP.

“But if there are actual expenses incurred on behalf of a service donated to charity — mileage on a car, gas or purchases — those can be deducted,” Schuster said.

Tax law also places restrictions on what qualifies as a charity.

“One of the big misconceptions about what is a monetary contribution is, ‘What is a charity?'” Rosenberg said. “Giving money to help a poor family isn’t a deductible donation. A charity has to be recognized by the IRS.”

Most churches and religious institutions qualify. Some schools and some government entities qualify, but many don’t. Overseas charities don’t qualify unless they have a U.S. registration. In addition, tax law also places restrictions on the total amount one can deduct for charitable contributions.

“The charitable deduction for any one tax year is limited to a percentage of the taxpayer’s adjusted gross income,” Schuster said.

That limit varies by the type of charity and the type of property donated. For example, cash donations to public charities like the Red Cross and most religious institutions are limited to 50 percent of the adjusted gross income, while cash contributions to private foundations must not exceed 30 percent of the adjusted gross income, Schuster said.

However, such limits don’t mean good deeds go unnoticed.

“Last year, a client told me they were going to donate a car and asked how much it would save them in taxes,” Rosenberg said. “I told them that since they can’t itemize, it would save them nothing. I recommended that they give the car to their children and let their children make the donation.”

“To them, it was worth nothing. To their son, the donation of $2,000 was worth about $700.”

Taxpayers can also save their receipts and take the deduction at a later date.

“If you have charitable contributions you can’t use this year, it’s all right. You can carry them forward to future years,” Rosenberg said.