Are you driving to a homeless shelter to help serve meals on Christmas Day? Perhaps you are buying books to donate as Christmas gifts for cancer stricken kids at your local hospital. Maybe you even toss in a little extra money during a religious service.
Helping those less fortunate this holiday season is noble but don’t forget your tax benefit. Charitable donations and miles driven for charitable purposes can be tax deductible. (Unfortunately donating shares of recently purchased shares of Green Bay Packers stock does not qualify for a tax deduction.)
Charitable Donation Deduction
Tips For Charitable Donation Deduction
√ To avoid IRS red flags, keep total charitable deductions (line 18 on Schedule A) within the normal limits which is around 3 percent of your gross income.
√ Charitable mileage deduction is only for individual tax payers who itemize their deductions on Schedule A.
√ Your time is never deductible as a charitable donation.
√ If you’re looking for a tax benefit for this year, make your donation before December 31, 2011.
√ Generally you may deduct up to 50% of your aggregate gross income or half of your total income, subject to income phase-outs. Specific types of donations such as gifts of stock have lower percentage ceilings.
√ You may not be able to claim a deduction if you receive financial or economic benefit, except to the extent that it exceeds the fair market value of the benefit.
√ Travel expenses are deductible only if there is no significant element of personal pleasure, recreation, or vacation associated with it, and then it is limited to necessary lodging and meals while away from home overnight while rendering these services.
Where to Find on Federal Tax Forms
Example of 2011 Form 1040, Schedule A,
Line 16 is for cash gifts such as those paid by cash, check or credit card to qualified charities. (If the gift was $250 or more, you need to have a receipt from the recipient though not included when you submit your tax return.)
Line 17 is for noncash donations such as gifts of property such as clothes, household dishes and toys as well as charitable expenses and mileage expenses.
Line 18 is for carryover’s from the prior years. Annual cash contributions can’t exceed 50 percent of your adjusted gross income and noncash contribution can not exceed 30 percent of your adjusted gross income. If you have more than these limits, carry it forward. You have five years to deduct it on future tax returns.
Line 19 is the total of line 16, line 17 and line 18.
First, make sure you volunteer or give to a qualified organization. The IRS has Publication 78, Cumulative List of Organizations described in Section 170(c) of the Internal Revenue Code of 1986 to help you in determining a qualified charitable organization. See an earlier post, for more Tips on Qualified Charitable Organizations.
Eligible charitable miles driven for a deduction include the following:
- Miles on your car while doing volunteer work for most hospital, school or religious organizations.
- Miles you drive to and from a charity to drop-off donated goods
- Other travel costs that can be included as charitable deduction: Parking fees, tolls, or public transportation expenses while doing volunteer work. Air, rail, and bus transportation, Out-of-pocket expenses for your car. Taxi fares or other costs of transportation between the airport or station and your hotel. Lodging costs, and the cost of meals.
IRS 2011 Charitable Mileage Rate
Allowable amount isn’t huge at $0.14 per mile but at least it is something. Making this calculation is pretty simple. Simply add up the miles you traveled for charitable purposes, multiply that number by the per-mile rate, and you end up with your deduction. Total Miles x Mileage Rate = Deduction
Note: State and federal taxes can be confusing and complex, you should contact your tax advisor on what you can and can not include on your tax return.
IRS 2011Federal Tax Brackets, Standard Deductions, and Personal and Dependent Exemptions can be found in an earlier post by clicking here. If you want to be proactive for 2012 tax year, read an earlier post on 2012 Federal Tax Brackets, Standard Deductions and Personal and Dependent Exemptions.
For more information on 2011 IRS Mileage Rates, Charitable Donations and IRS Tax Forms, go to the Internal Revenue Service website (http://www.irs.gov/). Federal Tax forms can also be found under the ‘Resources‘ tab at MoneyandMap.com.