Tax on Cash Donations, Non-cash Donations, Charity Expenses

Tax on Cash Donations, Non-cash Donations, Charity Expenses

Tax on Cash Donations, Non-cash Donations, Charity Expenses

A donation in any form can give you immense pleasure and harmony of sharing stuff with others who do not have access to such things. More people are interested in such noble causes than ever before. Apart from helping some people in need, you can help yourself as well. A Donation is one of the known ways of reducing your tax liability. Unfortunately, a lot of people started to misuse same and in turn forced the government to push for stricter regulations. The following are some important points that you need to consider when it comes to tax on donations or charity.

  • If you have done some non-cash donations to any organization and the same accounts to less than $250, you need to get a receipt from the organization. Think of it as the donations made to Salvation Army and the receipt that you get in return. You need to keep the receipt with you carefully for your tax returns. But do not file the same in your returns.
  • For any charity that you have done that ranges from $250-$5000, you need to get a comprehensive acknowledgement in written from the organization or charity. IRS has a format that must be followed for the written acknowledgement.
    • It usually includes the description of your donation, not necessarily the value of your donations.
    • If the charity provided any services in return of your donation.
    • If they did provide any services, a description of the same along with a fair value of the services.
    • Date of the donation, which will be helpful during the filing of tax returns.

 

You also need to produce a written valuation of the donations so that it can be attached with tax records. The evidence is essential for IRS to decide the deductions that you must receive as part of the donation.

  • In the event that your total non-cash donations are more than $500, you would need to fill up the Form 8283 and make it a part of your tax return. The form is specifically designed for noncash charitable contributions.
  • Should you want to donate items that include furniture or clothing it must be in good condition for you to claim the same in your returns. This can be a bit tricky but getting a valuation and attaching the same can bring down any confusion that persists. For an instance, you might want to donate any relic but their usual condition might not come under good condition criteria. The valuation criteria come into the picture if the donation is more than $500.
  • If you are planning to donate noncash item whose value is more than $5000, the above points hold good. In addition, you would need to furnish an appraisal of the item by someone qualified to do so. However, if you want to wish to donate anything that is traded publicly, then no such appraisals are needed. The appraisal is usually valid on property donation or donation that is beyond a specific value.
  • Tax payers who wish to donate tangibles such as car, boats or places have to deal with additional scrutiny. It is important to understand that the tax write-off will only come into picture once the charity or organization sells such an item. So, the IRS doesn’t really care about any valuations as long as the item stays with the charity.
  • Tax on cash donations largely depends on the tax bracket you qualify for. For example, a $100 donation for someone in 35% bracket would cost them $65 on paper. These values change every year, so it is worth checking the rates before you donate.
Self-employed Health Insurance

Self-employed Health Insurance

Self-employed Health Insurance

Self-employed Health Insurance




Things have changed a lot for the better for self-employed individuals post the introduction of the Affordable Care Act. Things were a bit different for self-employed individuals prior to the Act, as they either had to pay for pre-existing conditions or even worse could not get cover for the same. The ones who did manage to get health coverage for themselves would be severely restricted in the form of caps. In fact, insurers took the liberty of canceling the insurance over smaller technical issues as well.

There are no doubts that a health insurance is one of the larger expenses that one has to undergo. But thanks to the Affordable Care Act, self-employed individuals now have access to better protection and some even benefit from tax credit systems. However, it is essential to understand the health insurance in and out so that you can make the most of it. Here are some important details.

  • Exchanges

As per the Act, each state must put up an exchange or marketplace where insurers can sell their health plans. The Act also made way for subsidies for individuals who could not afford the plans on their own. If your annual income is less than a certain level, you qualify for tax credits as well. As per the official statistics, people who took the tax credits saw a dip in their insurance cost by as much as 73%.

  • Subsidy

Being aware of your health insurance plans was never this beneficial. You can easily reduce the premium costs by knowing details of the plan. The usual $396 plan is prior to any form of tax credit. If you factor in all of those, the effective price is just $106 per month. The subsidies are also valid for middle class families. To be more specific, if your income as an individual is less than $47520 and $97200 for a family comprising of four members, you qualify for the subsidy. However, it is important that you purchase your health insurance from the marketplace.

  • Deductibles

There are quite a few means by which you can reduce the premium costs of your health insurance. Opting for a higher deductible is one of the better approaches. If you are someone who is healthy and does not want to spend a lot on your health insurance, you can take this road. By opting for higher deductibles, you agree to pay a higher amount from your pockets if you fall sick as compared to someone with lower deductibles or no deductibles at all. It is at times referred to as catastrophic plans. But it doesn’t qualify for any tax credits and you must be within the age limit of 30 years to avail the same.

  • Tax Planning

The Affordable Care Act brings down the cost of the premiums after accounting for subsidies up front. Unlike some other tax credit systems where you must pay and wait for credits post filing your tax returns. When you opt for a health insurance you must provide your projected earnings for the rest of the year and the subsidy, if any, is then calculated on that amount. The tax credits are adjusted to your monthly premium amounts so that you do not get the pinch of it. When you file for taxes, ensure that you have been taking the right subsidy amount. There are chances of over or underestimation, but that can be taken care of during tax filing.

Another benefit for self-employed or freelancers is that they use the health insurance premiums as deductions. This is applicable even if your other deductibles do not cross standard deduction set.