Archive for Charity

 Man with umbrellas, questions raining down_The BudgetProfessional.com

Do you have a tax question? Send me an email and ask!
I’ll try to include your question and my answer in an upcoming Q&A article

What Is Your Question?

I Have a Small Business. What Can I Deduct on my taxes?

Q: I have a small, weekend photography business. Engagement and prom pictures are my specialty, and I’m spending a lot of money. What expenses can I deduct on my taxes?

A: A business expense must be both “ordinary and necessary” in order to be deductible. The IRS defines an “ordinary expense” as one that is common and accepted in your trade or business. A “necessary expense” is one that is helpful and appropriate for your trade or business.

You’re a photographer. Film, photo paper, darkroom chemicals, and memory cards are examples of ordinary expenses.

If you use anything in your business that you also use personally, (cell phone, car) keep good records and track what percentage of that expense is actual business use.

Is Loan Interest Tax Deductible?

Q: I took out a small loan last year and bought equipment for my lawn care business. Is the interest I pay on that loan tax deductible?

A: Yes, it is. The equipment you bought became an asset to the business, and the loan became a liability to be repaid. Usually, interest paid on a loan like this is a deduction.

Soup is a Charitable Contribution?

Q: I do a lot of charity work. Someone told me I could take a deduction for the ingredients I buy and use when I volunteer in the soup kitchen. I also recently bought a roll of 100 stamps and used those to mail fund-raising literature for my kid’s school. Is any of that really deductible?

A: Yes, it is, but keep your receipts. Ingredients bought for soup your prepare for a non-profit organization is a charitable contribution, as is the roll of stamps you bought and used for fund-raising. It’s very important that you keep the receipts to back up your claims.

Also, the law says that if a donation is more than $250, you need documentation from the charity receiving the donation. If your grocery receipts for soup, for example, total more than $250 for the year, the charitable organization will have to give you a written receipt showing dates and dollar amounts given.

You can also deduct a mileage expense if you drive your car for charity. The 2014 mileage rate is 14 cents a mile.

Keep written mileage records to back up your deduction. In an audit, mileage is one of the first things they try to take away, and they get that done because people don’t keep good mileage records.

Can I Deduct Living Expenses Working Away From Home?

Q: I’m a computer programmer, and last year I worked a temporary, 8 month job assignment in another state. I came home a couple of weekends a month. Can I deduct the living expenses for my temporary job?

A: It’s all about time. If you take a temporary job, away from what is considered your normal tax home, you may be able to deduct those living expenses IF the job lasts LESS than 12 months. If the job lasts for more than 12 months – surprise! – you have a new tax home. The IRS considers the temporary area to be your new tax home once you’re there more than a year.

 

You can file an amended tax return up to 3 years after the original filing in order to capture missing deductions or credits. Use Form 1040X to file an amended tax return.

Do you have a tax question? Send me an email and ask!
I’ll try to include your question and my answer in an upcoming Q&A article

What Is Your Question?

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Jan
18

A Different Kind of Birthday Present

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Chocolate birthday cake with candles

Last week was Mr.BP’s birthday. If I had asked him what he wanted for his birthday, he would have easily rattled off a long list that included everything from motorcycle parts to ski lift tickets.

As I sat at my desk paying bills the day before his solar return, it occurred to me to make charitable contributions in his name instead of buying a gift and wrapping it in pretty paper and a bow.

I have a short list of charities that I contribute to on a regular basis. Usually, every time bills are paid, I dash off a couple of checks to a few of the charities on my “favorites” list.

That night I wrote four checks and donated money in honor of the birthday boy to:

WAYSIDE WAIFS   This is a local no-kill shelter that places over 5000 animals in homes each year, and takes care of thousands more. Wayside Waifs has been around since 1940. Wayside Waifs is totally independent and non-profit, and does not receive any money from any local, state, or federal government. They do what they do entirely from donations and gifts. Almost 75% of their revenue is spent on shelter programs, with approximately 20% spent on fund-raising. Administrative expenses are nil.

SOLES 4 SOULS   This charity is trying to change the world one pair of shoes at a time. They collect new and gently worn shoes and distribute them to people in need in over 125 countries. Soles 4 Souls began in 2006, and as of the end of last year had given away over 19 million pairs of shoes. This is another charity with very small overhead – $69 million of the $70 million dollars they collected last year went to program services.

SOUTHERN POVERTY LAW CENTER  is a non-profit civil rights organization. The SPLC has brought the issues of hate and bigotry to national attention through the courts and the media. This is another one that spends the majority of its income on program services.

UNITY VILLAGE is a local religious organization. They have gorgeous rose gardens in season and beautiful fountains made for walking around when I want to wind down from my day. We take the dog over and romp through trails in their woods, so I send a few dollars now and then to help cut the grass.

These are just a few charities I donate to. PAWS is a local non-profit that provides free or reduced cost spay and neuter services for pet owners that can’t afford to have their pet fixed. PAWS is also independent, relying only on donations and taking no government money.

So many elderly seniors I know benefit from HARVESTERS that I give as often as I can to that organization. There are a few more local food pantries and rescue missions that are on my list, including a veterans charity or two.

Do you donate to charity? If you do, have you taken a look at how much your charity spends in administrative and fund-raising costs? Based on the money they take in, how much do they pay out in salaries to the highest paid employees?

You may be surprised to learn that the charity you are donating to spends very little on the cause they fund raise for. You do not want to donate to a charity that pays the CEO and other administrators huge salaries but spends very little on their program services.

It pays to check out your charity before you pay them any money. You can do that using Charity Navigator or GuideStar:

http://www.charitynavigator.org/

or

http://www.guidestar.org/

Both of these sites are filled with information about many charities. You will have to sign up for a free account on each site in order to have access to all of the information available, but all you need is a name and an email address.

If your charity isn’t listed, try checking with the major Better Business Bureau (BBB) in your area, or check the state corporate database. Charities have to file annual reports, and those should be on-line and/or available. Check with the Secretary of State if you can’t readily locate the state database on-line.

Don’t be afraid to contact a charity and ask questions about how much money they collect and how they spend it. The legitimate, transparent ones will gladly tell you how they spend your money.

After I signed the checks for the birthday contributions, I slipped them into envelopes. I handed the envelopes to Mr.BP and asked him to put stamps on them. He pulled out a check and looked at it, then glanced through the envelopes at the names, while giving me a puzzled look. I explained what his birthday present was this year. The wide grin on his face told me he liked his present very much.

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