Charitable Tax Deductions That May Surprise You

There are many people who make charitable donations every year and document them so that they can be claimed as tax deductions. However, many of us fail to take all of our charitable donations into consideration when going through our tax deductions, with some failing to even realize that some of the donations they have made are tax deductible.

There are in fact many charitable tax deductions that may apply to you without you even realizing it, and some people are very surprised to learn about the various donations that are actually tax deductible. Some of these donations are ones that you might make off the cuff without even thinking about it – such as sponsoring someone that you know for an event – but it is important to make a note of even these small donations, as it all adds up and could make quite a difference to the overall amount you can claim on charitable donations.

Some of the surprising charitable donations that you may never have thought of logging down as being tax deductible include:

  • Sponsoring a person you know: A huge number of us sponsor people that we know, often many times a year, for things such as fun runs and sports events to raise money for a good cause. Whilst you may not be sponsoring a huge amount, every little helps, so you should make sure you have a record of it in the form of a statement of you paid by card or cheque or a receipt if you paid by cash
  • Getting to sites where you volunteer: There are many people that like to volunteer to help out at good causes, which often involves going to one of the charity’s sites. Whether you take public transport or drive yourself to the site, the amount that you spend in terms of fare or mileage can be claimed. This is something that many people overlook, but if you volunteer and travel to the site regularly it can amount to a tidy sum. Bear in mind that you can only claim if you are not being reimbursed for your travel
  • Cooking for charity: There are some people that devote their time to cooking for charity, whether it is to feed people such as the homeless or to prepare something as a prize or a competition. If this is something that you do, make sure you keep a record of the cost of the ingredients as this is something that you should be able to claim back
  • Donations of items you have purchased: Some people give to charity not by donating cash but through items that they have purchased. You can claim back for the cost of the purchased items – just keep the receipt and a record of which charity they have been donated to
  • Donating used items: Many people would never think that they could claim against used items that are donated to charity, but you can. You need to look at the cost or fair market value (whichever is the lowest) to work out the value of the donation you have made

These are just some of the charitable donations that many people overlook when working out their tax deductions. It is important to think not only about the more obvious donations that you make, but also the everyday donations that you might make, which can easily be overlooked.

Esther is a blogger and journalist who writes about loans, mortgages and other financial issues. She also maintains a blog for paydayloansuk.org.uk.

An End To Charity Tax Breaks?

For a long time those who have contributed to charity have been able to see a benefit in terms of a lower tax bill. For British taxpayers this era may be coming to an end with Chancellor George Osborne seeking to close what he sees as a loophole.

With the current government having come to power partially on a platform of “the big society”,  a move to curb philanthropic donations seems slightly surprising. The idea of the “the big society”, as far as anyone was able to divine, was to replace aspects of the public sector with work by the charity and voluntary sectors.

It is not proposed to end tax relief for charitable donations altogether, but rather for there to be a cap put in place. There has been criticism of this proposal however, with many pointing out that wealthy individuals are donating much more to charity than they are saving on their tax bills.

Dodgers

There can be little doubt that tax chiefs see a problem in the way that things stand at the moment. Through canny accounting the amount income tax paid some of the wealthier Britons is thought to be just around ten percent.

While low tax returns are obviously a concern for the government, it is far from clear that this is a problem either for society or the economy at large. For instance large amounts of money are given to fund medical research and to help vulnerable groups. At the same time the argument against the 50p tax rate was that it is a force stopping the job creators from creating jobs, and surely that would also apply to any measure designed to increase the tax take from the wealthy.

Tax Planning

Minimising the amount that you pay in tax, within the law, is perfectly legitimate – by definition.  Planning your tax affairs in a way that makes sense for you does not make you a ‘cheat’ or a ‘tax-dodger’. Indeed if you cannot even be bothered to take the allowances you are entitled to with regards to your own money, should you be trusted with other peoples, for instance in a work situation.

It is perhaps true that the tax system is too complicated. It is very hard for the individual to avoid being ripped off by the taxman. In order to get the best deal it is often necessary to involve accountants and other professionals who are knowledgeable in the field.

Whether Osborne’s reforms go through as planned or not the British tax system, like all others, will continue to have its idiosyncrasies, and there will continue to be ways to avoid being stung for the full whack when it comes to tax time. Hopefully also charitable donations (which have fallen in recent years) will continue to be made.

Pamela Chimbonda wrote this content on the behalf of Adam & Co. who specializes in private wealth management.

Little Deductions You May Miss

You need to know what deductions may be possible even when you hire someone else to do your taxes. A quick look over the tax codes on the IRS.gov website will help you determine all of the deductions you need to be considering.

Top Deductions that are Missed

1.     Expenses that are NOT reimbursable by the company. Any expenses that are incurred during the tax year and that are considered ordinary and necessary for your industry can be used as a deduction on your taxes (at least a portion).

a.     Depreciation on work computers

b.     Dues paid to professional societies

c.     Chamber of commerce membership

d.     License fees for your business or occupation

e.     Tools and supplies used in work

f.      Work related education

g.     Union dues or other related expenses

2.     Most people overlook the potential of the deducting expenses associated with working at home. The Business Use of Home deduction can be applicable when your home is your principle place of business or when the space is used EXCLUSIVELY for business purposes. A portion of home expenses can be deducted when these criteria are met. The amount deductible will be determined by the percentage of home space used for business purposes.

a.     Real estate taxes

b.     Deductible mortgage interest

c.     Utilities

d.     Insurance

e.     Repairs

3.     Mileage on a vehicle can be deducted for a number of different reasons. The amount that is allowed will be determined by the activities, but the numbers can add up to substantial savings. Be sure to keep a written record of all mileage you intend to claim on your taxes.

a.      Business mileage – keep up with the trips you take for meetings, events or supply runs. Any time that you use your vehicle for business related purposes you can add that mileage to your totals. The business mileage has the highest allotment by the IRS.

b.      Charitable mileage would be those miles you put on your vehicle when driving in the service of a charitable organization.

c.      Medical mileage would be those miles put on the vehicle when visiting the doctor, dentist or other medical specialist.

4.     Casualty, disaster and theft losses may be overlooked by many people when it comes to taxes. The amounts you can claim on your taxes are only those above any payments made by insurance companies. You will along be able to claim a portion of those totals. These loses are generally deductible for the year they occurred. Property located in a federally declared disaster area may meet different guidelines.

Knowing all that you can about the tax code will help you find even little deductions that you might be missing. A tax professional can make it easier to weed through all of the tax code. Some of the deductions seem little until you begin to add them all up. Counting a penny here and a penny there will help you save big money in the long run.

The key to making the most of your tax deductions is documentation. Keep well organized records of your actions and activities (for your business as well as your personal activities). It will be easier for you to sort through the records when they are in order. Good documentation will help you discover any of those little deductions you may have otherwise missed. The more deductions you uncover the lower you will be able to push your tax bill.

 

Nick Maddux has been in the finance industry for 3 years; he contributes to blogs that deal with insurance deductions and where to get a free credit score report.