Charitable Deductions

Charitable giving can be a great way to help the less fortunate as well as save on your taxes. The first rule of charitable tax deductions is that your donation must go to a legitimate and government qualified organization. Charitable organizations must file an application with the IRS in order to be qualified. The IRS website
has an useful online search tool for finding qualified charities.

If you have already donated your time, money, or services to a charitable organization and are interested in filing for a charitable deduction, the first step is to turn your attention to the tax form 1040. You should itemize your deductions on Schedule A of that form.

If your charitable donation is a purchase, such as a ticket to an event or memorabilia item, you should deduct the market value of your ticket from the total amount of your donation. For example, if you purchase a ticket to a charitable dinner for $100, of which the market value of the dinner is only $60, you are permitted to claim only $40 of that donation. "Fair market value" can be defined as the price at which the item would exchanged at by a willing and fully aware buyer and seller. You cannot claim a deduction on any item you derive financial benefit from.

In addition, if you wish to claim a deduction in excess of $250, you must have bank statements, a written acknowledgment of your donation from a qualified organization, or other financial documentation. You will not be allowed to claim a deduction without the proper documentation.

Below are some other circumstances in which you can claim charitable deductions.

- You may be able to deduct your expenses if you have a foreign student living with you through a qualified organization.
- You may be able to deduct your expenses for uniforms if the charity or volunteer organization you donate your time to requires them.
- You may be able to deduct the cost of your gas and oil if you directly use your car while in commission for a charitable organization.

Enjoy your charitable giving!

Tax Scams You Should Avoid

We are all familiar with the old adage, "There are only two things in life that are guaranteed: death and taxes." While every citizen files taxes each year, some of us are more familiar with the process than others. Accurately and correctly filing taxes is important and mistakes, even innocent ones, can lead to anxiety-inducing audits and monetary fees. Below I have complied some of the more common "Tax Scams" that you should be avoid while filing your taxes.

1. Frivolous arguments: It is a common misconception that you can get gain hundreds of dollars on your tax refund by filing for loopholes and tax liabilities. The IRS has an entire page on their website dedicated to "frivolous tax arguments" that should be avoided completely when filing. You can get the maximum amount of money back on your taxes without making exaggerated claims. Furthermore,  filing frivolous claims can result in a $5,000 penalty from the IRS. 

2. Income Tax Schemes: Abusive tax structures are essentially plans to avoid paying the taxes you legally owe by concealing your true financial situation. This is primarily achieved by trying to disguise your ownership of expensive assets by using shell companies or foreign financial accounts. If you become involved in an income tax scheme and are caught by the IRS, you can face severe penalties. 

NB: It is important to remember that ignorance of the law is never a valid legal defense. If you are ever convicted of a tax-related crime, it will not work to plead ignorance that your actions were illegal as your defense. That is why it is important to work with reputable professions who can ensure that

3. Misusing trusts: Trusts have useful and valid legal benefits, but they can also be abused. Consult with a lawyer and/or tax professional before you commit any assets into a trust.