What donors should know about deductions

Photo courtesy of Metro Creative

Donating to charity is a selfless endeavor that may lead to rewards when donors file their tax returns.

Giving to charity is a selfless act that’s worthy of recognition. That recognition can come in many forms, and donors should know even the “tax man” likes to reward those who donate to charity.

Both the U.S. and Canada reward donors with tax credits. The financial services firm H&R Block notes, in the U.S., taxpayers can deduct donations made to qualified charities. Such deductions must be itemized, but they can greatly reduce a person’s taxable income.

According to TurboTax, Canada also has a generous tax credit system, rewarding taxpayers who donate to charity by giving them a credit that’s up to 29% of the amount donated at the federal level. In addition, taxpayers also may be entitled to an additional amount up to 24%, depending on which province they call home.

Laws regarding donations and tax deductions can be difficult to understand, so donors should always discuss their donations with their financial planners or tax preparers before filing their returns. The following is some general information regarding donations and deductions that can be useful to prospective donors.

Are all donations deductible?

H&R Block notes, in the U.S., donations must go to one of three types of groups in order to qualify for deductions. Donations made to nonprofit religious groups, nonprofit educational groups and nonprofit charitable groups, which are often referred to as 501(c)(3) organizations, may qualify for deductions.

The Government of Canada notes the Charities Directorate can be contacted directly at 800-267-2384 to confirm if a charity qualifies for a tax deduction.

Does a donation have to be money in order for it to be deducted?

Non-cash donations are eligible for deductions in both the U.S. and Canada.

Do I need to get anything from the organization I donate to?

In most instances in the U.S., H&R Block notes charitable organizations must provide donors with certain information for donations to be deducted: a receipt that indicates the organization’s name, address and the date and location of the donation must be submitted. In addition, the amount of the donation when donating cash or, in the case of non-cash donations, a reasonably detailed description of the items donated.