Charitable giving. Good for your soul and your finances.
If the economy has forced you to tightening your belt, be thankful you still have a belt.
As more Americans turn to charity amid worsening economic gloom, now may be a good time to consider the advantages – altruistically, as well as financially – of investing more in your fellow man.
- From 69-72 percent of Americans routinely contribute to charities1
- Contributions have increased during 39 of the past 40 years in today's dollars. (A change in the tax laws, not the stock market crash, is blamed for the drop in 1987.)1
- Even in the midst of a recession in 2008, charitable giving was still more than $300 billion – down only 2% from 20072
- As in previous years, about 75 percent of that came from individuals2
- Some 61.8 million Americans volunteered through an organization in 2008 – up one million from the previous year – accounting for 8 billion hours of service worth an estimated $162 billion3
12 facts about giving and volunteering
- Contributions are deductible for the year in which they’re actually paid for or delivered. Pledges are not deductible until the year in which they are paid.
- When you donate used clothes, furniture or similar items to charity, you may deduct their fair market value – the amount people would pay for the items at thrift shops or used clothing stores.
- Look for local volunteer opportunities at such Web sites as the federal government’s Serve.gov.
- Direct contributions to needy individuals aren’t deductible. Contributions must be made to qualified organizations to be tax deductible.
- The fair market value of goods donated to a thrift store is deductible as long as the store is operated by a charity. There’s no deduction if the goods are sold on consignment – as in, the original owner gets a percentage of the final sales price.
- The value of volunteer time or services to a charity isn’t deductible. However, out-of-pocket expenses directly related to voluntary service may be.
- Contributions for which you receive a gift or other kinds of benefits are deductible only to the extent that the donation exceeds the value of any benefit you receive. Say a charity charges $10 for a box of candy that normally sells for $8; you can claim only $2 as a charitable contribution.
- You cannot deduct the full purchase price of tickets to a fundraising event -- only that portion above the actual value of the meal, entertainment, etc.
- Nor can you deduct the price of tickets to a charity fundraiser even if you let the organization give your tickets to underprivileged or disabled children.
- Membership dues that merely cover the cost of privileges or benefits you receive are not deductible. However, dues that actually constitute a contribution for which you receive little or no privilege or benefit of monetary value in return are deductible.
- The price of participating in a raffle or similar drawing cannot be deducted as a charitable donation.
- Remember that when you file your taxes, you’ll need to itemize your donations on Schedule A of the 1040 form. You can download the form and the instructions for how to fill it out from IRS.gov.
Sources: Internal Revenue Service, Philanthropic Advisory Service of the Council of Better Business Bureaus
Is it deductible? Help is available.
When in doubt about the deductibility of contributions seek advice from your tax professional or consult the IRS. Various IRS publications about charitable contributions and deductions are available at local offices and on the agency’s Web site.
1 The Center on Philanthropy, Indiana University
2 Giving USA 2008 -- The Annual Report on Philanthropy, published by the AAFRC Trust for Philanthropy
3 Volunteering in America 2009, the Corporation for National and Community Service
Neither the company nor its representatives give legal or tax advice. Please consult your attorney or tax advisor for answers to specific questions.