What Is Charitable Giving?
In plain words Charitable Giving can be defined as an act of giving money, time or some goods to unlucky or inopportune people, directly or through a worthy cause like a charitable trust. The idea of such giving is generated from the virtues of charity where you give something to the needy people to help in their survival. People facing poverty like orphans, widows, injured and ailing helpless elders are considered as the genuine recipients of such charity giving.
But businesses and individuals also make some charitable giving or contributions every year for reducing their tax bills. So the idea of Charitable Giving can also be linked with writing off from your income by giving something in charity. According to some people the value of time spent in volunteering can be considered as charity and can be deducted from tax bill whereas others consider the contributions made to some organization as deductible from your tax bills. All these explanations create much confusion while defining Charitable Giving as all of these assumptions cannot appropriately be considered Charitable Giving. Technical meaning of Charitable Giving is provided here under for your consideration.
Technical definition of charitable giving as per IRS
Charitable Giving can technically be defined as the money donated by you in terms of securities, goods or services to an organization, the market value of which you can deduct from your income tax return. According to IRS the deductible contributions must be made to the organizations qualifying the terms set by IRS. The contributions made to some particular individual, political candidates or organizations cannot be termed as deductible Charitable Giving.
In this way you must focus on qualified organization while making deductible donations. You cannot deduct the amount donated to some downtown shop or an uncle nearby you. In fact you can deduct the Charitable Giving contributed to non-profiting organizations only. The organization receiving donation from you must qualify according to IRS norms and for the purpose of promoting education, religion, charity, science or literature etc. So you can use IRS tool to find out whether the organization demanding donations qualifies for it or not.
Types of charitable giving
Apart from monetary contributions IRS permits you to give and deduct the value of the things donated by you like clothing, cars, artwork, valuable items, securities, real estate and jewelry etc. You can be eligible to deduct the value of these items from your tax return. But if the value of your Charitable Giving in terms of goods exceeds $500 then you will have to fill up specific forms to be eligible for deducting them from your tax returns. In this way, time, cash and property donated by an individual or business to a qualified organization can be termed as Charitable Giving eligible for deduction.
How to deduct the donations made in cash, time or property?
Some people consider the market value of their time spent in volunteering can entitle them for tax deductions but according to IRS all such contributions cannot be eligible for tax deductions. Though these donations seem to be legal but IRS does not consider them legal as the value of time for every individual cannot be the same. It makes difficult for IRS to verify the worth of your time or the amount of time you have sent in volunteering. Similarly personal expenses involved in volunteering cannot be deducted also unless the cost is directly related to your work of volunteering like cost of oil, gas, transportation by bus or air, supplies and uniforms etc. But to support your deductions you must be able to furnish receipts whenever required during audit.
In order to control dishonest taxpayers who lower their tax bills through fake deductions against Charitable Giving IRS has introduced various forms to document everything. You must have a valid receipt of any contribution made in cash or kind more than $250 to prove your eligibility for deductions.
Thus the term Charitable Giving can be defined in various ways as some consider it as giving a charity to some needy person or organization whereas for some it is a source of reducing their tax bills. Though the later meaning is termed as legally acceptable but former also cannot be ignored completely.