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October 20, 2020


Not all charitable donations are tax deductible

There is nothing wrong with having a giving heart. In fact, some would say that more people need to give to charities that are struggling to meet demand on their services, especially during these uncertain times. One of the perks of charitable donations is that they are tax-deductible, but are they really? The truth is that not all of them are, and if a Texas resident is looking for a way to give and reduce his or her tax bill, it pays to do some research first.

Not all non-profit organizations qualify for tax-deductible donations. It depends on what they do and how they are organized. Ordinarily, religious entities and charities do qualify under section 501(c)(3) when it comes to receiving donations. However, some organizations that fall under this section of the U.S. Tax Code do not.

Then there are entities that fall under section 501(c)(4) that people who donate to them will not receive a tax deduction. Of course, as seems to be the case with nearly every situation, there are exceptions. Volunteer fire departments and veteran’s organizations whose membership consists of at least 90% war veterans do qualify for tax-deductible donations under this section.

Even when an individual chooses to give to a qualified organization, other rules apply. The IRS only allows the deduction for donations actually given during the tax year in question. A promise to donate at a future date does not qualify. Money spent on raffles, lotter-type drawings, and bingo games are not deductible, along with any donations not given through a 501(c)(3) for people in need. The timing of contributions matters as well.

Many people make sizeable charitable donations each year or want to, but they may also expect them to be tax deductible as well. Understanding the rules regarding giving can be frustrating and problematic without some help. Before deciding to give any sizeable amount to an organization, it would be worth the time to consult with an experienced Texas tax attorney first in order to avoid losing out on this benefit and potentially making a costly mistake at tax time.

IRS Tax Collection