Holiday generosity pays off during tax season
By the U of A System Division of Agriculture
Dec. 18, 2015
- Charitable donations can be claimed as tax deductions
- Seventy-two percent of $358 billion in donations for 2014 came from individual donors
- Arkansas has a high ‘giving ratio’ among its 75 counties
LITTLE ROCK — From colleges and churches to food banks and foundations, the holiday season is a time for charitable giving. And, although doing good is its own reward, those donations can come in handy around tax season, said Laura Hendrix, assistant professor of family and consumer science with the University of Arkansas System Division of Agriculture.
“With the end of the holiday season comes the beginning of tax season,” she said. “If you give to charity before the end of the year, those contributions can be tax-deductible.”
Specifically, charitable contributions can be claimed as itemized tax deductions. This includes credit card charges made in 2015 and checks mailed by December 31. So long as the transaction is completed by the end of the year, it counts, said Hendrix.
Individual consumers are responsible for the lion’s share of charitable giving every year.
Americans donated an estimated $358.38 billion to charity in 2014, with 72 percent coming from individual donors, according to Giving USA 2015: The Annual Report on Philanthropy for the Year 2014. The Giving USA Foundation, which advances philanthropy through research and education, has published the report every year for the last 60 years.
Arkansas ranks among the top states in the country for individual giving, according to The Chronicle of Philanthropy, an independent news organization serving philanthropic interests. The Natural State, along with most of the South, shows a high “giving ratio” per county — the ratio of itemized charitable contributions to adjusted gross income.
For example, Pulaski County has a giving ratio of 4.18 percent, with the highest contributions coming from low-income families. Households earning $25,000 or less per year showed the highest giving ratio, a whopping 12.15 percent.
That’s a lot of tax-deductible donations, assuming the organization is eligible, said Hendrix.
“Only donations to eligible organizations are tax-deductible,” she said. Check out eligible charities at IRS Select Check (www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check) and learn more about qualifying deductions at www.irs.gov.
So, the organization is eligible and the donation has been made. Now what?
“Make sure you itemize,” said Hendrix. “You can only claim the deduction for charitable donations if you itemize.” Tax filers can either itemize or take the standard deduction. The standard deduction is $6,300 for single filers or $12,600 for married couples filing jointly, unless the itemized deductions will be more than that.
“If your itemized total isn’t more than the standard deduction, you’ll pay more in taxes,” she said.
Remember to keep a written record of any donations. These records are needed in order to claim a deduction. This can be a cancelled check, bank statement or credit card statement as long as it includes the name of the charity, the amount, and the date of the contribution.
Donations of $250 or more require an acknowledgement from the charity. This also applies to other types of donations, such as household items or clothing. Acknowledgements must include a description of the items contributed. Special rules apply for donations of vehicles, boats, and planes when the value is more than $500.
All this information is easiest to obtain when the donation is made. Organize and store records and other tax-related paperwork in a safe place, and tax season will be a little jollier.
“Give with all your heart, but use your head,” said Hendrix. “Tax season is almost here.”
For more information about creating a spending plan, managing credit, building savings and investing for the future, contact your county extension office or visit www.uaex.edu.
The University of Arkansas System Division of Agriculture offers all its Extension and Research programs and services without regard to race, color, sex, gender identity, sexual orientation, national origin, religion, age, disability, marital or veteran status, genetic information, or any other legally protected status, and is an Affirmative Action/Equal Opportunity Employer.
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Media Contact: Mary Hightower
Dir. of Communication Services
U of A Division of Agriculture
Cooperative Extension Service