Get the tax benefits on the donations you make

22-Apr-2014

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Donating funds to charitable trusts are under tax deduction which can reduce one’s tax bill. There are many ways through which one can save some money by giving charity to an authentic charitable trust.

Making a charitable donation is the one of the quickest and easiest ways to reduce tax bill. By donating one can support their favorite cause and lower the tax bill at the same time. Tax deduction starts from every gift of more than $2 to an approved charity. There is no limit on the amount one can claim. Only making large donations is not allowed as it can create a tax loss.

Charitable donations have now become a favorite method of disposing of excess earnings by many business houses. This is mainly done at the end of year to generate goodwill as well as reducing their tax liability.

One should always read tax related rules for charity giving. This might be a good idea to consult a lawyer or tax adviser as they can guide properly in this regard.

Below are some basic rules and benefits related to charity.

As said above, all charity made in the deductions of $2 and over to an approved charitable trust will be tax-deductible. But tax deduction cannot be claimed if one receives something in return of donated money. For example, if one receives a pen or chocolate bar in return of buying a ticket for charitable dinner, tax deduction will be denied.

No matter how small the amount of money is donated, one should always keep all official receipts. These small but frequent can add up over a financial year and can surprise the donor with a handsome amount of money.

In case of donating shares as charity, their value should be equivalent to $5000 or less and purchased at least 12 months before the gift is made. In the same way, for making a gifted property as deductible item, property should be purchased in the 12 months before the donation.

One should be careful while donating as there are many scammers present in the form of charitable trust or organization. So one should always check whether the organization or trust is registered with the Taxation Office. If one has made donation to these fraud trusts, the donation will not be tax-deductible.

While making a donation through a third-party, i.e. a door-to-door collector or via an advertisement on the Internet, one should always remember that he might have paidsome of his money into an advertising agency or other company as a commission. So the total amount donated is not being received by the charity. Some of it is charged by the third party as commission. So the best to make a charity is by direct bank deposit or payment by credit card.

Business Tax Write Offs

Basically tax deduction and a tax write off are same things. One won’t know what they can legitimately write off if they have no idea of the deductions which are allowed by the IRS and can be put on the tax return form. What one doesn’t know can be very painful in tax write offs. Tax write offs may not  be allowed under the normal circumstances but can become a possibility if the circumstances change and the business owners fall under the allowed provisions.

Businesses are taxed on the basis of the income they receive in a particular year often designated as the financial year. Any debt which cannot be repaid or where the debtor fails to make the repayment of the same are categorized under the bad debts and are often pulled out from the financial records to be placed under the write off category. One does not have to include any bad debts while calculating income for annual return but have to declare them.

Loans

One can write off any personal loans for bad credit taken for personal funds to help support the business, even though one has categorized it as an income so as to get the net worth of the business to a higher level. They cannot be subjected to tax as they are loans not income. One might get a tax write off on the interest payments if he has taken business loan from a third party lender.

Pension Plans

If one has a small business of less than a hundred employees and their employees are offered pension benefits, there is a certain benefit to the employer. The tax credit offered on the contributions are not deducted from the gross annual income of the employer but the amount of money which comes under the taxable slab. Whatever way you look at it , in fact it is a tax write off but not in the literal sense to be quoted in the IRS dictionary.

The government does what it can to encourage businesses to look out for their employees. Social security net is in no way sufficient to cover the needs of the millions of Americans yearning for it.  Government interventions and support help the employees build a corpus through pension which they can rely on in the times when they require and are in maximum need of funds to support themselves in their golden years. However, the tax credit offered to the businesses see them flourish at the same time.

One can also take a tax write off on any state and municipal taxes which their business pays. These taxes will be definitely accounted for and will be a part of the deductions made on the total taxable income.

Travel Expenses

A tax write off can be claimed on trips related to one’s business rather than pleasure. So these can be claimed on expenses related to business trips. Some of these expenses are related to the business expenses made on the travel made through different modes like the cabs, air fare or the expenses on the rental cars hired for the business purposes. One can take a write off for the mileage if he drives his own car.

If you have made up your mind to go ahead with the donations that next step would be to look  for the organization which can help you donate the money for the purpose you wish to. In case you are looking for the donations to qualify for tax deductions one must know that there are certain set of items which can be put under this category and one should therefore consult the tax advisors before they get into the act of donations. Any donation which aims at the upliftment of the downtrodden and the support of the society are generally considerers under the donations which qualify deductions.

If you want that your donations qualify for the financial benefits , you need to do some research soa s to check for the institutions and the donations which qualify for the deductions and take a receipt of the donations from the institutions. Check if the organizations you are dealing with are registered under the clause 501(c)(3).

One of the most widely used donation items across US is the car donation. A lot of charitable institutions across US take the possession of your car or the car as donation and use it for the charitable organizations to transport people from one place to the other. Several others may auction your car to raise money and use it for funding the various charitable programs. One can always get tax benefits on the same.

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