The first thing you need to know is this: not all charitable donations are tax-deductible. This is because "tax-exempt" does not mean "tax-deductible." If you want to make sure you can deduct your donation, look for an organization that has 501(c)(3) status - this means that donations are deductible. If you aren't sure about the 501(c)(3) status of your organization of choice, then ask (they'll be more than happy to tell you).

According to the IRS, you can deduct donations to:

  • Religious organizations
  • Federal, state, or local governments
  • Non-profit schools and hospitals
  • Public parks and recreation facilities
  • War veterans groups

You can't deduct donations to:

  • Individuals
  • Labor unions
  • Social or sports clubs
  • Foreign organizations (except certain Canadian and Mexican charities)
  • Homeowner's associations
  • Political candidates
  • Time

Once you have determined that your gift is in fact deductible, dig out the receipts that prove you made your donation. If you have given a non-monetary gift (such as a car or clothing), you are entitled to deduct the fair market price, which means that you might need to get an appraisal. If you get something in exchange for a donation (say, tickets to a charity ball), you must deduct what is the fair market price of that perk.

Once the amounts are set, you will need to fill out Form 1040 (you need Adobe to read this file). You will also need Form 8283 if your donations total more than $500. As you fill out these forms, itemize your deductions (hence, the receipts). Here are the basic rules:

  • Gifts under $250 can be backed up by either a receipt or a written record recording the date, amount, and recipient of the contribution.
  • Gifts over $250 require a receipt.
  • Gifts over $5000 require a receipt as well as a written appraisal for non-monetary gifts.

Here's the last good piece of news: if you donate less that 20% of your Adjusted Gross Income in a particular year, you can deduct it all. If you donate more than 20%, you'll have to talk to the IRS to figure out exactly what deductions you qualify for.

The last thing to remember: timing is everything. In order to qualify for a deduction in a given tax year, you must make your gift by December 31 of that year.

All this tax stuff is tricky, and honestly, it gives us headaches. But no one said that giving to charity was easy. For complete information, read this full explanation of the rules from the IRS.

Now go out there and make Gandhi proud!