4 Steps To Maximize Your Charitable Giving Tax Break

Ashlea Ebeling for Forbes writes: For the 26% of taxpayers who itemize charitable deductions on their tax returns, keeping good records is a must, and Intuit’s TurboTax has a handy free solution: an online software program called ItsDeductible, and an even handier new ItsDeductible App launched this week for Apple’s iphone with iOS7. Given that it’s giving season, why not give it a try to see if you can unlock some extra tax savings. It worked for me.

To sign up, you give your email (if you have a TurboTax account, use the same login) and income range (that’s only used to calculate running tax savings). There are useful reminders sprinkled throughout to make sure you play by Internal Revenue Service rules. Then run through the four categories of giving and see how it adds up.

Cash. You start by entering charities (if you’re a repeat giver, you only have to do this once), then the date and amount of gift, whether in hard cash, or by check, credit card or payroll deduction. You still need to hold on to proof of the gift as backup of your entries—a statement from your bank or credit card company showing the date of the donation, the amount and the name of the recipient. If the gift is $250 or more, you need a written acknowledgement from the charity.

Stuff. From books to vacuum cleaners, ItsDeductible gives you drop down menus with estimated values for the stuff you donate to charities like Goodwill or your local thrift shop. You have to use your judgment and your conscience, whether an item is in high or medium value. Friendly reminder: Tax laws do NOT allow charitable deductions for contributions of household items and clothing NOT in used condition or better; in other words, your stuff better be in good used condition to garner a tax break.

Stock. This is often seen as a taxwise giving strategy just for big donors but donating appreciated stock held long-term (one year or more) is a savvy way to stretch your giving dollars, even for smaller gifts of stock. You avoid paying any capital gains tax due on the appreciation, and you get a deduction for the fair market value of the stock on the date of the gift.

Mileage. Recording mileage is overlooked because it seems petty, but it can still add up at 14 cents a mile (not the 56 cents a mile business expense mileage rate). You can enter one trip or recurring trips, say you drive 200 miles roundtrip drive to a charity board meeting three times a year. You can add other expenses like parking, tolls or train fare too.
When you’re done logging (you can download a summary report as a PDF or export it into your TurboTax tax return) you might wonder, how your charitable deductions stack up to your peers. The Internal Revenue Service tracks the average charitable contribution deductions made by itemizers by income range. Here’s a summary chart, courtesy of tax publisher, CCH, a Wolters Kluwer business:

$15,000 to $30,000: $2.058
$30,000 to $50,000: $2,285
$50,000 to $100,000: $2,815
$100,000 to $200,000: $3,857
$200,000 to $250,000: $5,824
$250,000 or more: $19,651

The IRS take a “dim view” of taxpayers who base their claimed deductions on these figures, notes CCH, but the averages are useful to see if your deductions are out of line so you can take extra care to document your claims.