Giving part of your assets to charity is a very noble act that not only makes other people’s lives better but also brings joy to your life. The government recognizes and appreciates this selfless act by giving tax deductibles to individuals when they are passing down their inheritance to their loved ones or just filing their yearly taxes in California. However, one must follow strict IRS guidelines if they are planning to donate.
Charitable donations in California: definition
In California, charitable donations are gifts that an individual or corporate entity gives for philanthropic purposes. These gifts may be tangible assets such as money, property, services or other items of value. Individuals or entities that want to donate must do so to an eligible organization, according to the Internal Revenue Code (IRC). And for people who make a monetary donation, they must make it directly from their personal funds and not from any business accounts or retirement plans.
Examples of eligible organizations
Eligible organizations include registered 501(c)(3) entities, churches and educational institutions. These organizations typically have an IRS Determination Letter certifying their tax-exempt status. Other types of organizations may also qualify for tax deductions if they serve charitable purposes such as the prevention of cruelty to children or animals, relief of poverty or distress, religious purposes, scientific research, etc.
Tax deduction rules
The IRS can deduct gifts made in cash or property from your taxable income on a dollar-for-dollar basis. However, certain rules apply when it comes to deducting these gifts:
• You must obtain a receipt from the charity you donated to stating the date and amount of money you gave them.
• To receive a deduction of more than $250, you must have a written acknowledgment from the charity that includes their name and tax ID number.
• You must keep track of all donations made in one year to report them on your taxes accurately.
• You cannot deduct volunteer hours or out-of-pocket expenses.
Following the above rules will ensure you benefit most from your charitable donations in California. Not only will you receive a tax deduction, but also the satisfaction of knowing that you are helping others and making a difference in your community.
