Many do not realize it, but, it is possible to save big on taxes while eliminating unused, unnecessary, and unwanted items during your spring cleaning activities. Most know and understand that qualified charity-based contributions may be deducted from your taxes; however, there are several methods – apart from writing a check – that will allow you to assist those that are less fortunate all while lowering the tax bill that you are responsible for each year. The Internal Revenue Service provides those that elect to donate items several generous allowances; however, you must ensure that you keep detailed records of your donations and know how much that you are personally entitled to deduct with those donations. If you want to save big on taxes with your spring cleaning, continue reading for must-know information that will assist you.
Donate to Qualified Organizations
Once you have gathered items in and around your home that you no longer use, need, and/or use, you must identify a qualified organization where those items may be donated. It is important to understand that, for your belongings to be considered a valid type of tax deduction, the items must be provided to an organization that is on the Internal Revenue Service’s list of charities that are considered to be “qualified”. Most major charities, schools, and religious groups are considered to be qualified. To confirm that the group or organization that you want to donate to is on this list, click here.
Internal Revenue Service Maximums
While it is true that all organizations appreciate donations, the Internal Revenue Service imposes maximums on the amount that may be deducted from your tax bill. According to the information on maximums, you are permitted to take a deduction from the donations that you provide to a qualified organization that is worth up to half of the adjusted-base gross income that you make. If you donate to private organizations, this limit has a reduction rate of 30%. In order to save big on taxes with your donations, you should ask the organization that you are donating to about its deductibility code. This will highlight your limit. If you are donating more than the IRS maximums, you may carry the additional donations over to the following year’s tax bill and deduct it at that time. The following outlines the top deductibility codes:
- PC – This stands for “Public Charity” and the limitation is 50%.
- POF – This stands for “Private Operating Foundation” and the limitation is 30%.
- PF – This stands for “Private Foundation” and the limitation is 30%.
- GROUP – This is designated for central organizations that hold a group exemption letter and the limitations vary, based on several different factors.
- LODGE – This is designated for organizations that operate under the “Lodge System” and the limitations for charitable purposes are 30%.
- UNKWN – This stands for “Unknown” and is designated for organizations in which their charity status has yet to be determined.
- FED – This stands for “Federal Governmental Unit” and the limitation is 50%.
- FORGN – This stands for “Foreign Organizations” and the limitations vary.
- SO – This stands for “Supporting Organization” and the limitation is 50%.
When you elect to donate unused, unneeded, and/or unwanted items to a charity, you will need to determine the value of the items based on how much those items are sold for at the organization in which you are donating. You should always ensure that you obtain a receipt for your donations so that you are able to save big on taxes. If the items that you wish to donate are valued at higher than $500.00, it will be necessary to obtain a professional-based appraisal of the items and you must keep the documentation that you receive from the charity. By following the simple tips outlined in this guide, you will find that it is easy to save big on taxes with your spring cleaning activities!