How to Get a Tax Deduction
You’ll only get a tax deduction if you itemize your taxes. This only makes sense for people whose deductions would be greater than the standard amount, a category that can include property owners, business owners and people with numerous medical expenses. If you’re not sure whether it makes sense for you to itemize, consult an accountant or a tax service such as TurboTax. (For 2011, the standard deduction for single taxpayers is $5,800; for married, $11,600; for head of household taxpayers, $8,500. Some groups, such as those 65 and older and the blind, get higher deductions; exact thresholds and amounts can be found here.)
In order to get the deduction for your 2011 taxes, you must donate the money on or before December 31st. However, if you are buying property and your accountant expects that you will itemize your deductions next year, then it may make sense for you to wait until January to donate. That way, you will receive the full tax benefit of your gift and, as long as your charity’s fiscal year does not end December 31, the gift will still fall within their tax year.
If your donation is less than $250, you only need a bank record or receipt; if it’s more, the organization must provide a written confirmation. If you donate stock or anything else beside cash, the deductible amount is fair market value of the property.
While it’s important to be financially smart about how you give, in the end, it’s not about your tax deduction, or about what you get back from giving to others. It’s about getting into the spirit of giving, and making sure you create room for it in your life. If you’re not able to give as much money as you’d like this year, make a New Year’s resolution to spend and save better so you can grow in both prosperity and generosity next year.