Planning To Donate To Charity? Do It Before The IRS Deadline

Time is running out if you’re planning to donate more to charity in 2012, with hopes of writing off your charitable contributions on your tax returns.

December 31, 2012

This year, New Year’s Eve falls on a Monday, which is a good thing if you still want to donate to charity. Last year, the last business day of the year – and the IRS deadline for charitable donations – was December 30th, which left a lot of would-be donors up a creek.

Of course, it’s best if you don’t want until the last minute to make your donation. Ever tried to drop off a pile of goods at your local Goodwill or Salvation Army depot the last week of December? It’s a nightmare, and a logistical headache. Instead, make your contribution well ahead of time. You can make a donation to a charity using your credit card, even if your billing cycle doesn’t end until sometime in 2013; as long as the payment is processed before midnight on the 31st, you’re in the clear. Just remember that not every charity is located in the same time zone, so if you’re a West Coast resident like me donating to an East Coast-based charity, don’t forget the three hour time difference, which could affect the day on which your payment is recorded.

What You Can Write Off

Not all contributions can be written off the same way. For example, say you attend a holiday auction for a charitable organization, where you place a $500 bid on two tickets to a sporting event. Now, let’s pretend you win that auction – hooray! Now you’ve got the tickets and the tax deduction, right?

Not so fast, my friend.

The IRS stipulates that you can only write off the overage compared to the fair market value. So if you “donated” $500 to get those tickets, which would normally sell for $80 each, you can only write off $340 of your donation instead of the full amount. This goes for every donation you make, so if you participated in a charity 5K with a $25 entry fee and got a t-shirt in exchange, you’d better find out the market value of that shirt (many sites suggest $3-$5) before filling out the Schedule A on your Form 1040.

Cash vs. Non-Cash Donations

Making a large non-cash donation to a qualified charity requires a little extra legwork. The IRS requires all non-cash contributions over $250 be accompanied by additional verification of the transaction, via bank records of a receipt from the organization itself. Donate more than $500 in non-cash goods over the course of the calendar year and you’ll have to not only provide the IRS with those records to receive your tax deduction, you’ll also have to fill out IRS Form 8283 to get credit for your contributions.

April 15, 2013

Unlike last year, when Tax Day fell on Tuesday the 17th of April (thanks to an obscure holiday celebrated only in Washington, DC, on the 16th), this year Tax Day will be on the usual April 15th. Why remind you of this date, when the IRS deadline for charitable contributions is three and a half months earlier? Because even though your donations are due before the end of the calendar year, you can still make contributions to your Traditional and Roth IRA accounts through midnight on Tax Day.

And one last bit of information, just so the Federal Government doesn’t make a liar out of me in a few months. After some extreme catastrophes, like the 2010 earthquake in Haiti, the U.S. Government and the IRS extends the deadline for charitable contributions in order to facilitate donations. If this happens – and we all hope it won’t – it won’t be a blanket extension of the deadline, but will only apply to donations made to specific charities that are aiding in specific disaster relief efforts.

3 Responses to Planning To Donate To Charity? Do It Before The IRS Deadline

  1. It’s also important to note that donations are only deductible if 1) the charity is certified by the IRS, and 2) if you can itemize. But, the most important thing to remember is that donations are not a dollar-for-dollar reduction of tax liability, so if someone is giving away money for the sake of the deduction, it is essentially a waste based solely on economic reasoning.

    • @Eric J. Nisall – DollarVersity, you’re right on both points, but hopefully nobody is making charitable donations for the sake of the deduction! I don’t think we need more reasons to give to charity!

  2. I totally agree Daniel, but there is one troubling thing comes to mind: the timing. The abundance of year-end calls for donations relating to tax planning really makes this point stand out in my mind and makes me question just how many people actually donate just to take advantage of the tax potential tax benefit.