Want to know a secret all wealthy people know? Here it is: it pays to be generous. That’s because donations to tax-exempt nonprofit organizations can be deducted from your taxes, so you’ll pay less when you file your return. You can give back to causes you care about on Mightycause … while easing your own tax burden. Here’s everything you need to know about tax-deductible charitable donations, so you can give gifts that give back.
The importance of year-end giving
The end of the year is make-or-break for many nonprofits. You’ll see lots of campaigns around the holidays and before the start of the new year. That’s because, just like the rest of us, nonprofits are taking care of their housekeeping before the start of the new year. They’re finalizing their budgets, planning their programs and trying to make sure they’ve got the funds to pay for everything. December 31st is the biggest day of the year for tax-deductible charitable donations, and they’re counting on their supporters to come through for them so they can cover their expenses in the new year.
The deadline for making tax-deductible charitable donations for the current tax year is 11:59:59 p.m. on December 31, 2017.
What donations qualify?
In order for a donation to be tax-deductible, it must be made to an organization that is tax-exempt. That includes nonprofits that have tax-exempt status with the IRS and most churches.
On Mightycause, we verify that charities are tax-exempt for you. So, if you’ve made a charitable donation on Mightycause, you can rest assured it is tax-deductible. Every nonprofit has an Employer Identification Number (or EIN) assigned by the IRS. That’s how they keep track of tax accounts. Mightycause verifies that the EIN associated with a nonprofit is tax-exempt before we let them collect donations on our platform, and we regularly check to ensure that all nonprofits on Mightycause have active nonprofit status. (Nonprofit status can be revoked by the IRS, often for failing to file the necessary annual paperwork.) If you need to verify an organization’s tax-exempt status for yourself, you can plug their EIN (which is public information) into this tool from the IRS.
Donations to personal cause fundraisers on Mightycause are not tax-deductible charitable donations. Although they are generous and awesome, the funds go to individuals’ bank accounts, and are therefore not tax-exempt.
Tracking your tax-deductible charitable donations
When you make a donation on Mightycause, we email a receipt immediately. But things happen! You might change email addresses, or the receipt may have been accidentally routed to spam. Besides, who wants to hunt down a year’s worth of receipts in your inbox, anyway? To make tracking your donations easier, we’ve made your complete donation history available from your Mightycause user account.
All you need to do to view your donation history is log into your Mightycause account, then go to your user profile.
Then, find Your Contributions and click “Get Receipt.”
From there, you can print the receipt or save it as a PDF. We’ll also generate an annual report of your donations from 2017, and you’ll find it on the same page as your contributions once it becomes available. (Don’t worry! We’ll email it too! If you need to update your email address, you can change it from your Account Settings.)
Other tax-deductible charitable donations
Mightycause only handles online donations, so while we’re not able to help you track these kinds of donations, we want to make sure you know about them!
Cash donations aren’t the only kind that qualify for tax deductions. In-kind donations (meaning giving a physical item to a charity) count too! So, if you made a big donation of food to your local food bank, or bought new beds for all the dogs at your local animal shelter, or donated your vehicle, get a receipt! The receipt will need to display the dollar value of your donation. It is best to get receipts for major in-kind donations — the IRS requires receipts for any deducted donations over $250. So, you don’t need to get a receipt for donating a can of green beans that cost you 89¢ to a food bank. But you should definitely get receipts for any major in-kind gifts!
Lots of companies encourage their employees to give to charity by setting up programs that automate charitable giving. Your employer is legally required to provide you with some kind of documentation (either in the form of pay stubs, your W-2, or a statement). So, if you know you signed up for a charitable giving program through your job (such as the Combined Federal Campaign), check with your human resources department if you need to know how much you donated through a payroll deduction program.
This is advanced-level philanthropy, and chances are that if you’re donating appreciated assets like stock you’ve got an accountant helping you manage it. But it’s another way you can use charitable giving to offset your taxes. This type of giving can also help you avoid the capital gains tax.
How to get the deductions
In order to deduct charitable donations from your taxes, you’ll need to itemize your tax deductions on your tax return. This is done on your 1040.
To itemize, or not to itemize?
That is the question. Point-blank, if you want to deduct your charitable donations, you’ve got to itemize. However, there are certain situations where itemizing isn’t the right thing to do. Here’s what you need to consider:
- Filing status. Are you single, or married? If you’re married, are you filing jointly or separately? These questions might seem a little personal, but they will determine what your standard deduction is.
- Standard deduction. Determine what your standard deduction is. This chart will help you determine your deduction.
- Total donations. How much did you give in 2017?
You’ll need to weigh your total donations against your standard deduction to determine which is most beneficial to you. If your standard deduction is $6,350 but you gave a total of $500 to charity, it’s probably not worth itemizing them. However, if you gave $10,000, it might make more sense to itemize your deductions.
Understanding how tax reform affects donations
There’s been a lot of media coverage about tax reform legislation lately and it can be confusing. Here’s what you need to know: Congress passed tax reform legislation that will go into effect in 2018. It is a complex piece of legislation that will effect many Americans’ finances, including charitable giving. And it can impact different kinds of charitable contributions differently. For instance, provisions related to giving to universities in exchange to seating at athletic events were removed. Like we said, there’s a lot to digest! So if you give at a high level, you should talk to your accountant about the changes to understand how it effects your philanthropic efforts. You will start seeing the effects when you file your return for 2018 — in 2019.
One thing that’s important to know is that the standard deduction will be nearly doubled in 2018. As we discussed, in order to see a tax benefit, your tax-deductible charitable donations will need to be greater than the standard deduction. So, that means that you will need to give at a higher level in 2018 if you’re hoping to offset your tax burden with philanthropy.
With all of these changes in mind, giving before the deadline of December 31, 2017 may be more important if your annual charitable giving is between $6,350 and $12,000.
Consult a professional
Look, we aren’t tax accountants at Mightycause, we’re just a bunch of folks who’ve spent time working for nonprofits. So, before you do anything related to your taxes, talk to a professional!
Need help locating your receipts? Contact our friendly customer support staff at firstname.lastname@example.org!