Money Girl explains when making a charitable donation can also be a money-saving tax break.
Making a charitable contribution is always good for the soul—but did you know that it can also be good for your wallet?
A reader named Lori asks:
"I purchased a painting from a non-profit foundation. Later, I received a letter stating that the profits of the sale will benefit the organization. Does that mean that my purchase is tax-deductible?"
If you’re like Lori, you’ve probably purchased something from a charity or made a donation to a non-profit organization and then wondered if you should claim it on your taxes.
In this episode, I’ll tell you what kinds of donations and purchases are tax-deductible, so you never miss a money-saving tax break..
Most contributions of money or property that you make to a qualified organization are tax-deductible. That means you can subtract them from your taxable income, which reduces the amount of tax you have to pay.
What Is the Standard Tax Deduction?
While this tax perk sounds fantastic, there’s a hurdle you have to jump over to qualify for it. Charitable contributions are deductible only when you itemize deductions on Schedule A of Form 1040, instead of claiming the standard deduction on your taxes.
Taking the standard deduction is always easier than itemizing deductions. However, for about one out of every 4 taxpayers, itemizing results in a lower tax bill.
So get familiar with all the deductible expenses on Schedule A, like mortgage interest, unreimbursed expenses for your job, medical expenses, and charitable donations. Then keep track of them throughout the year, so itemizing may be an option for you at tax time.
If the total of all your deductible expenses is higher than the no-questions-asked standard deduction, you’ll come out ahead by itemizing.
For 2013, here are the standard numbers by tax filing status that you’ll need to beat in order to make itemizing pay off:
- Single: $6,100
- Married filing jointly: $12,200
- Head of household: $8,950
- Married filing separately: $6,100
There are even higher standard deductions for those who are 65 or older or blind.