The US government has passed a law that allows you to contribute up to $500,000 (in 2019) of your own money to your favourite charity, with no payment or taxes required. The Internal Revenue Service has named this new benefit the “Charity Cloverleaf Tax Deduction.”
This benefit allows you to give money to a charity, and not have to pay taxes on the income. The benefit is available to individuals, or to those filing jointly. In 2020, this deduction will be available for individual US taxpayers who file tax returns and have an adjusted gross income of $100,000 or less. For those who qualify, the deduction will be itemized on your tax return and will reduce your taxable income by that amount.
Charity Categories To Consider
To qualify for the deduction, your donation must be made to a “qualified” charity. The IRS has classified these as charities that primarily engage in fundraising, or in providing direct care or relief to those in need. An example given by the IRS is a charity that provides food and shelter to the homeless or a shelter for abused women.
Since the charity must be a “qualified” one, this further limits your choices. In addition to the above requirements, you must also consider whether or not the charity is registered with the IRS. If not, then you cannot claim the tax benefit.
Registered Or Not- For Better Or Worse
Charities that are registered with the IRS are required to follow a set of rules and regulations. In general, registered charities must follow the same rules as other, non-registered charities for determining who can be a beneficiary, and how the money is spent. However, you should not assume that a registered charity is necessarily better than one that is not registered. Your decision should be based on the merits of the charity and whether or not it fits within your personal criteria.
Decide How Much You Can Give
The above discussion has assumed that you want to give to a single charity, and that this gift will not be combined with any others. However, if you decide that you want to give to several charities, then you have to decide how much you can give to each one. If you have decided that you want to give the maximum allowable amount of $500,000, then you have to choose one charity, or create a pooled fund for all of your donations.
Look For Charities That Are Best Suited To Your Taste
Charity is not a commodity, like gold or stocks, and you should not shop for your charitable donations based on market fluctuation. This could lead you to make rash decisions, and potentially lose out on valuable deduction dollars. Instead, you should look for charities that align with your personal values. Do some research into the values and mission statement of the various charities, and make a list of your top five choices. Remember, you can always add more charities to this list, but you cannot remove any of the existing ones. When you make your final decision, this will ensure that you have considered all relevant factors, and that your decision is a thoughtful one.
As discussed above, the deduction only applies to gifts made to charity. If you have decided to exercise this benefit, then you have to follow a few more rules. If you are planning on giving cash, you have to make a cash donation. The charity may not ask you to do this for them, but you have to follow the rules. You cannot give them a check, as this will create too many problems for the charity. They will most likely not be able to deposit your check in time, and it could even cause them some financial risk. This is why the above article has recommended that you consider gift cards as a more suitable means of giving.
If you are going to use your credit cards to make a purchase, then you have to ensure that these are valid credit cards. You cannot use expired credit cards, as this will leave you liable to a fraudulent act. Be sure to keep all of the cards in your wallet, and make sure that all of the information is correct.
The IRS has made it easy for you to reduce your taxable income by giving to charity. If you want to make a donation, but you do not want to pay taxes on the money, then consider the above guidelines. Ensure that you pick a charity that is best suited to your taste, and that is registered with the IRS. Look for charities that are tax-exempt in your area, as this will ensure that you do not have to pay taxes on the money.