Deductions and Donations: What Donors Should Know

Giving to charity is a selfless act that’s worthy of recognition. That recognition can come in many forms, and donors should know that even the “tax man” likes to reward men and women who donate to charity. Both the United States and Canada reward donors with tax credits. The financial services firm H&R Block notes that, in the United States, 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 percent of the amount donated at the federal level. In addition, taxpayers also may be entitled to an additional amount up to 24 percent 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 that, in the United States, 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 that the Charities Directorate can be contacted directly at 1-800-267-2384 to confirm if a charity qualifies for a tax deduction. In addition, TurboTax® notes that the Canada Revenue Agency (https://www.canada.ca/en/revenue-agency.html) provides a searchable online database that allows donors to confirm if a charity is registered and eligible for deductions. Does a donation have to be money in order for it to be deducted? Non-cash donations are eligible for deductions in both Canada and the United States. Do I need to get anything from the organization I donate to? In most instances in the United States, H&R Block notes that charitable organizations must provide donors with certain information in order for donations to be deducted. A receipt that indicates the organization’s name and 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. The Government of Canada advises donors to keep official donation receipts from registered charities and other qualified donees for five years. Official receipts should not be sent in with tax returns. For a list of what items must be on the receipts, visit Canada.ca. Donating to charity is a selfless endeavor that may lead to rewards when donors file their tax returns.

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