Is your donation actually deductible?

I met with someone in October. He had filed a 6 month extension for his taxes in April and now in mid October the deadline was again looming and it was time to finally get his taxes in order. There was a long list of things that were discussed. One thing we talked about was some clothes that he had donated. Everyone “knows” that if you donate items to a good cause you can then take a deduction for it. Like everything else in the tax code, it’s not actually that simple. In order to be able to deduct a donation it has to be given to a qualified charitable organization. So when you walk past a homeless person and give them a dollar, while you’re doing a nice thing, the IRS doesn’t care.

In this case he had donated a bag of clothes to a fundraiser for a young girl who was ill. I’ve been to a few events like this. All of the ones that I have been to have been run by the family itself. In that case what you’re doing is considered giving them a gift, not making a charitable donation. Fortunately, this was one of the rare exceptions. This family had actually partnered with a local charity so all donations were actually considered to be given to that charity and not just the girl’s family. So, we were able to get him the deduction and everyone lived happily ever after.

Another key factor to consider is, are you even eligible to deduct donations at all? Charitable donations are accounted for on Schedule A of your 1040. On this schedule is a whole list of items that you can take deductions for, but you need to several thousand dollars worth of deductions here to make it worth it. This is something that’s generally only done by people who own a house. So if you’re not eligible to itemize your deductions, which most people aren’t, then your deduction is good karma, but it wont help you on your taxes.

Like everything else in the tax code, charitable donations are more complicated than they should be. There are rules about how much you can donate to what type or organization and what documentation you’ll need. If you have any questions about a donation you’d like to make, it’s always better to ask a knowledgeable tax professional before you make the donation and not on April 15th.