Charitable Contribution and Tax Deduction

Charitable Contribution and Tax Deduction

Giving is part of Christmas and most holidays for that matter. It is tradition across the world for people to exchange gifts during holidays and other important days of the year. Corporate giving is one of the ways in which the companies give back to the communities in which they operate. It is a way in which the locals are allowed to share in the fortunes of the company that is in their environment. That is just one part of it; the gifts that are given away have tax implications to the company or the person who is giving them away. To start with, the company that is giving away the gift may be required to pay taxes due on that gift if it goes beyond certain thresholds. This is why it is important for the gift giving season to be handled with caution.

First, companies should confirm whether the firms to which they are bestowing the gifts are authorised. Checking whether a company is authorised can be done on the IRS website through a quick search. Those organisations that are not listed should be further scrutinised to determine if they are working under a tax deductible scheme. In general, it is much better to deal with firms that are listed since you can deduct your contributions to them for tax purposes. It is also important to note that the small gifts are not usually deductible unless a check is written or a receipt is received for such a gift. In the same vein, any donations that are in excess of $250 have to come with a contemporary receipt. This receipt acts as proof of the donation since the cheque only is not considered to be full proof. In general, you are allowed to deduct the value of the goods that you receive from the total of the receipt. In cases where you do not receive a gift in return, then you are supposed to indicate the same on the receipt for the IRS to consider it a valid proof of transaction. This receipt is required to be given at the time when you make the contribution as the IRS usually does not accept any receipts that are made out later. In essence, for every contribution you make that you intend to deduct from your taxable amount, it is important to get a receipt for the same immediately after making the contribution so as to be on the safe side with the tax man.

The rules for making contributions are generally simple. You are required to make a list of all the goods that you are contributing and to who you are contributing them to. Afterwards, calculate the value of these goods and get a receipt for them once you drop them off at their intended destination. Some of the goods such as art or cars may have special rules applying to them. For the larger donations, it is important to have an independent valuer make a valuation on your behalf for taxation purposes.

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