Christmas is the season for giving and Americans are not going to be left out. While you may wish to give to your favorite charity this Christmas, the IRS has issued some useful guidelines to help you claim tax deductions on the amount you give.
Firstly, you need to give only to charities that are qualified for tax exemption. Tax-exempt charities are listed in the IRS website at www.irs.gov. Search for the name of your charity using the Exempt Organizations Select Check tool when visiting the website. You should give to your charity by December 31 for it to be included in your 2012 tax return. This applies to a credit card charge as well. However, you do not have to pay for the charge by December 31; you can pay for it in 2013.
Secondly, know what is considered a charitable gift. If you give a gift to a person, it is not considered a charitable gift no matter how needy or worthy that person may be. But gifts in the form of cash or property to qualified charitable organizations are considered charitable gifts. The amount deductible would be how much cash you contributed or the fair market value of donated property. However the rules are different for some donations, including clothing, household items, cars and boats
Thirdly, it is important that you keep accurate records of you gift. Acceptable records include bank or credit card statements, cancelled checks, salary deduction records or an official receipt from the charity containing your name, the amount you gave and the date. You should also ask for a written confirmation from the charity that shows the charity’s name, contribution date and amount. Make sure you keep these documents well so that you can submit them with your tax returns.
Fourthly, you should refrain from making purchases with your anticipated tax refunds. Although most people receive their refunds within 21 days of their tax submissions, there are no guarantees. If for some reason you tax refund is delayed you may run into financial problems if you make major purchases with your refund money. So it is advisable that you don’t plan big purchases now solely because of your expected refund.
Finally, you should start gathering the documents you’ll need to file your taxes in 2013. These would include receipts, canceled checks and other documents that substantiate the income or deductions you’ll claim next year.
More information about this can be read at IRS Publication 536.