How to Reduce Taxes With Charitable Contributions
Congress has long recognized the need to encourage private, charitable giving. Those who give to charities are generally not taxed on these donations. The mechanism to claim this tax benefit is the itemized deduction from income. Charitable contributions are a "below the line" deduction, meaning the total of all below-the-line itemized deductions must exceed 2 percent of gross adjusted income. Additionally, there is no income tax deduction for charitable giving available for individuals who do not itemize their deductions.
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Instructions
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Select a charity or charities. To qualify for a tax deduction, your charity must be a bona fide tax-exempt organization. Contributions to individuals, political parties and candidates are not tax deductible.
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Obtain a receipt for your contribution. Any legitimate charity will happily issue you a receipt. If you cannot get a receipt, then donate by check, so that your canceled check serves as a record of your contribution. You must be able to show proof of the contribution for any charitable gift of $250 or more.
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File your taxes. To claim charitable giving deductions, you must file using a Form 1040 and itemize your deductions on Schedule A. If you made noncash charitable gifts of more than $500, you must also file IRS Form 8283, Noncash Charitable Contributions. If you gave more than $5,000 worth of noncash contributions in the form of a single item or a group of similar items, you must also get the item or items appraised by a qualified appraiser.
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Compare your tax bill with the charitable giving deduction to your tax bill if you take the standard deduction. To itemize deductions, your total itemized deductions must exceed 2 percent of your annual income. Further, you can only claim a tax benefit to the extent your deductions exceed 2 percent of your annual income. If you gave a comparatively small amount, or you are in a low tax bracket, you may be better off taking the standard deduction of $5,700 for a single filer and $11,400 for a married couple (as of 2010).
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