Claiming Tax On Donations: Everything You Need To Know

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Donating to charitable funds will help you in gaining peace of mind and adding to betterment of society. There are multiple charitable funds like a local Childfund Cambodia based that are working in their own capacity to bring a positive change in the society and work for a number of causes. However, it should be necessary to consider that you can only claim tax redemption for contribution or donations to the organisations that are identified as deductible gift recipients or DGRs. You are only eligible to claim tax deduction only in the situation when you are not on the receiving side of a material benefit in return to the contribution you have made. For instance, purchasing a ticket for a fundraising dinner where you are at the receiving end of a benefit. This doesn’t fall under the category of valid donations. Here are some details that you need to know regarding tax deductions on donations:

Conditions for Tax Deductions:

If you want to claim a tax deduction for a donation you must meet some conditions like the gift or donation should be given to an organization or fund that is classified as a DGR. It should be noted that the gift you are giving must be a gift. In simple words, it should be a voluntary transaction of money or transfer of property without any expectation of a return on the gift. You should receive nothing in return from the party that has received a gift from you. The gift should be made in the form of money or property. The gift can be given in the form of financial assets like shares as well. 

Claiming Tax Deduction:

In case if you are making monetary donations, you can claim a deduction when the total amount of donations equals $2 or more. In case of transfer of property as a gift to charitable organisation or fund, a variety of rules are applicable. Additionally, it also depends on the type of property and its applicable value when gifted. It should be noted that the tax deduction claim can be made only in the tax return of the year in which you have gifted or donated. The receipt you receive from the charity organisation or fund in return of the donation you have made should clearly state that you can claim tax deduction on the basis of this specific donation. In case if you have donated an amount of above $2 to charity fund using web or phone, you can claim tax deduction on the basis of web receipt or credit card statement as valid proof. Similarly if you have donated some amount using third parties like banks or retail outlets, you can claim tax deduction by showing the receipt you have received from third parties. There are times when you contribute through workspace giving along with your other colleagues, tax deduction for such scenarios is also possible with just one small yet simple condition, the amount you have donated should be clearly written on your payment summary.

Invalid Tax Deduction Claims:

While there are many options that can help you in claiming tax deduction on the basis of donations or gifts you have made to eligible funds or organisations. There are some cases that don’t allow you to claim a tax deduction. These cases include raffle tickets, gifting things like chocolates or pens or purchasing them for the sake of charity, the cost of attending dinners for fundraising, you can’t make a claim for tax deduction even if the amount you have spent on the fundraising dinner is considerably higher than the value of the dinner, and payments made to funds intended for development or building of schools as a n alternative to avoid increase in the school fees.

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