Driving around eastern North Carolina in the aftermath of Hurricane Florence is a truly heartbreaking experience. So many homes and businesses were damaged or even destroyed by the storm. We all want to help our friends and neighbors who were affected, but you have undoubtedly seen many warnings in both mainstream and social media urging you to be cautious with your giving. We’re going to show you how to know if the charity receiving your donation is legitimate, how to ensure your gift is tax deductible, and explain why you might not care if it’s deductible or not. This article is meant as a follow-up to our previous blog on charitable giving.
It’s unfortunate that there are those who would use a disaster like this to scam well-meaning folks out of their money, but we all know such people exist. Therefore, unless you’re dealing with a well-known charity, a good first step is to check out the organization. Both Guidestar (www.guidestar.org) and Charity Navigator (www.charitynavigator.org) provide a wealth of information on thousands of charities. You can use them to check an organization’s non-profit status, see how much their top executives are compensated, and learn what percentage of donations actually go to the group’s stated mission.
If you want to ensure your donation is tax-deductible, there are some steps you should follow. First, make sure the recipient has been granted 501(c)3 status by the IRS. This status is conferred upon organizations that meet certain criteria; search this link on the IRS website to see if your intended donee is listed. Remember that gifts to individuals are not tax-deductible; only donations to charities on the 501(c)3 list qualify for tax deductions.
Make sure you get a receipt for your gift. Monetary donations should be acknowledged by the charity with a receipt clearly stating the amount given and the value of anything received in return for the contribution (ie. a book/cd set in return for donating to public TV); if nothing of value was received, the receipt should say so. If you donate goods, the charity will give you a receipt simply stating you gave them clothing, household goods, etc. It is up to you to keep a detailed list of what you gave and the fair market value of the items donated. This is the value of the goods in their present state, not the price you originally paid for them. You may find the Salvation Army donation value guide to be useful in determining this value. Of course, if you bought cleaning supplies, hygiene items, or food to give away, you’ll want to keep your store receipts to document the value of the donation.
If you are volunteering your services to help disaster victims, you cannot deduct the value of your time or skills. For example, a carpenter who runs a home building business cannot deduct anything on his tax return for volunteering his time and expertise to help rebuild a friend’s house even though he would normally charge for that service.
However, if you are volunteering for a qualified charity, you may be able to deduct related expenses. You can deduct 14 cents per mile driven in service to the charity, and you can deduct the cost of any supplies needed to perform volunteer work for the charity.
If you’re reading this and thinking that your neighbor can make better use of your cash donation than a national charity, then keep in mind that due to the Tax Cuts and Jobs Act, most taxpayers will no longer itemize on their tax return, opting instead to take the nearly doubled standard deduction. Since charitable gift deductions are only available to those who choose to itemize, you may no longer care if your generosity is potentially tax deductible or not. Now, more than ever, you can provide help where you feel it’s needed most and not be too concerned about the tax consequences.
However, if you do have questions about charitable giving and taxes, give us a call. Let’s all pitch in and do what we can to help our region recover and show that we are Carolina Strong.
