Having knowledge on how tax deductible donations affects tax your income is important for any donor. Donors can only claim deductibles of up to a certain amount if they donate to the right gift recipient.
For the donation to be tax free, it must comply with the stipulated gift conditions. A gift can either be in form of cash, property or goods. Donors must also prove that the gift was really a gift and not a loan or payment for something.
Different countries have different rules as to how much a donor can claim for tax deduction. For instance, donors can claim 100 percent of their contributions provided it does not exceed half of their adjusted gross income. If a donor donates property, he or she can claim 100 percent of their donation provided the value of their contribution dies not exceed 30 percent of their adjusted gross income.
On the other hand if your contributions consist of capital gains, you can claim full deductions provided it does not exceed 20 percent of your total adjusted gross income. If the contributions exceed these limits, they can be carried over to the following financial year. Deductions can only be carried over for a period not exceeding 5 financial years.
Donors should be aware that some contributions are not considered tax free. They include contributions to political parties, donation to individuals, penalties and fines paid to the federal and state governments, contributions to for-profit hospitals and schools and contributions to other governments.
While making contributions is a positive thing, you should make sure that you are making tax deductible donations to ensure that your net income is not affected. When you want to make a contribution, you should first find out whether the charity organization has an active DGR status (i. E., deductible gift recipients). You can find out more about charities by searching the internet.