A Guide to Holiday Tax Deductions

If you plan to give back this season, take advantage of the tax breaks.

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During the holiday season, many of us reminded of the many blessings in our lives find ways to give back to the community. There are plenty of ways to give back, and several can net you some savings at tax time if you keep track of your contributions.

Most of us will never give away loads of money specifically for the tax breaks like large businesses and the super-wealthy might do. But if you're planning to give back anyway, you might as well take advantage of the tax deductions.

You can take tax deductions for many forms of giving back, whether it's writing a check to your favorite local charity, driving to a soup kitchen to donate your time or dropping off a big box of clothing and toys at Goodwill or the Salvation Army. But to take advantage of these tax deductions, you have to give to the right organizations, carefully track your giving and file your taxes correctly.

Giving to the right organizations

In order for your donation to qualify for a tax deduction, the organization that you give to must either have tax-exempt 501(c)(3) status with the Internal Revenue Service or be a religious organization that’s not required to obtain 501(c)(3) status.

To determine if an organization or charity has tax-exempt status, check the IRS website. The Exempt Organizations Select Check tool will let you check for organizations that are eligible to receive tax-deductible contributions. You can search for organizations by name, Employer Identification Number or location.

While a donation to any organization approved by the IRS could net you some tax benefits, you may want to do a little further digging to ensure that your charitable donation will be used properly. Other resources to check out include: Charity Navigator, which ranks charities based on their transparency and efficiency; GuideStar, which publishes nonprofits’ tax forms each year; and the Better Business Bureau’s Wise Giving Alliance, through which you can find ratings for specific charities.

Tracking your giving

As with all tax deductions, when it comes to giving to charity, you need to document, document, document!

Whenever you write a check or give cash to a charity organization, ask for a receipt. If you donate to a charity regularly, it may compile all your giving records and send them out at the end of the year. But this may not happen for one-off gifts. So be sure you get a receipt.

If you’re planning to donate goods – even to local thrift stores – you can take a tax deduction for the current value of those goods. Clean out your closets, and reap the tax benefits! Again, getting a receipt is a good idea, and most of these organizations have a relatively quick process for calculating the current value of goods and giving you a receipt.

Note that if you’re donating a lot of used items or very expensive items, you may have to prove what you originally paid for them, as a way to confirm the current market value of your items. So it’s a good idea to keep receipts for items you replace often and are likely to donate when you’re done using them.

While you can’t take a tax deduction for time donated to a good cause, you can deduct mileage if you're driving for the benefit of a charity organization. Keep track of your mileage as you drive to volunteer or haul goods for a charity. If you're using your own car, you can deduct 14 cents per mile on your taxes. (That's the mileage rate as of 2013.)

File your taxes correctly

One final note: You can only take charitable donation deductions if you itemize your taxes, rather than taking the standard deduction. If you don't make a lot of money or don't have a lot of write-off opportunities, the standard deduction may benefit you more – even if you give a lot of money or goods to charity.

However, if you'll benefit from having your taxes itemized, then these charitable donations could save you some serious cash. You'll just want to talk to your tax professional or check the options on your do-it-yourself tax filing software to decide whether or not to itemize.

And even if you don't itemize your taxes and can't get money back for your donations, it always feels good to give back! So research the charities you want to work with, and consider how you can donate money, goods or time this holiday season.

Abby Hayes is a freelance blogger and journalist who writes for personal finance blog The Dough Roller and contributes to Dough Roller's weekly newsletter.