Charitable donations & tax deductions People make charitable donations for various reasons. Some are motivated by a desire to give back to their communities, while others may be inspired by a particular cause whether that cause is based down the street or across the globe. Network for Good, an organization that helps non-profits connect with prospective donors, says 89 percent of American households give to charity. Gifts average 3.2 percent of household income, or roughly $1,620 annually, and oftentimes such donations are tax deductible. The Canada Revenue Agency (CRA) and the United States Internal Revenue Service are the organizations tasked with overseeing taxrelated issues. In-depth information regarding applicable tax deductions can be found on their respective websites, www.cra-arc.gc.ca and www.irs.gov. Individuals also consult with a qualified accountant should they have any questions regarding charitable donations and deductions. In addition, there are some guidelines for donors to follow when making donations and claiming tax deductions.
ternal societies, churches, nonprofit charitable organizations, volunteer fire companies, and medical research organizations are considered qualified organizations. • Americans also may be able to deduct contributions to certain Canadian charitable organizations covered under an income tax treaty with Canada. But such deductions are typically reserved for those donors who generate income from sources in Canada. Consult with an accountant concerning contributions outside of the United States. • Fair market value is used to determine the value of clothing or other non-financial donations. The CRA defines gifts as goods, securities and land. Special rules may apply to vehicle donations.
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• It is important to keep receipts for all charitable donations. This helps verify the donation and can be beneficial should donors be audited down the road. You must have a donation receipt in order to claim charitable contributions on Canadian taxes. The receipt should list your name, address, the charity’s registration number, the value of the donation and additional pertinent information. • American donors must file Form 1040 and itemize deductions on Schedule A when deducting charitable donations. Canadians will fill out schedule 9 on their T1 income tax return. • Donors can make the most of their good deeds by keeping good records and selecting approved charities before filing their tax returns.
• Recognize that only charitable contributions made in the calendar year are potentially eligible to be claimed as deductions. For example, only those donations made between January 1, 2013 and December 31, 2013 can be claimed on your 2013 tax returns (filed in 2014). Therefore, if you’re hoping to deduct donations as soon as possible, do your giving before the end of the calendar year. • Canadians can only claim charitable donations on their taxes if the charities that benefitted from their donations are recognized as registered charities. A list of registered charities is available on the CRA website. Donors also can verify with a charity if they are registered before making donations. • The United States also requires donations be given to a qualified organization for donors to earn a deduction. You cannot deduct contributions made to specific individuals or political candidates and organizations. In general, trusts, foundations, war veterans’ organizations, domestic fra-
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According to the Network for Good, 89 percent of American households give to charity.
COMMUNITY OF GIVING 2013