Claiming a Tax Deduction for Charitable Donations: 3 Top Tips

Donating items as a gift to charity can have two significant benefits. Firstly, it will tend to make you feel pretty good about yourself. Secondly, it could also help to cut your tax bill as, under Australian law, donations to charity are tax-deductible. However, it is important that the amount of tax you claim back for the item is an accurate reflection of the value of the item. If your tax returns are audited, and it is discovered that you have overestimated the value of your charitable gifts, you could face a hefty tax bill and possible fines from the authorities. Below is a guide which will help you to establish and prove the value of charitable donations.

Stocks and Shares

If you wish to donate stocks and shares to a charity, it is important that you determine the value of them before officially transferring them. Of course, the value of stocks and share is constantly changing. The best way to establish the value of your gift is to review the trading results for the day the offer of the gift was made. You should calculate the average trading price using the high and low points on that particular day and use this value on your tax returns.

Land, property or artwork

If you are donating a piece of land, a property or a work of art to charity, it may be difficult to value because all of these items are subject to market forces. The best way to establish the value of an item such as a piece of land or a work of art is to ask a professional from that industry to carry out a full appraisal. You should have the appraisal signed and dated so you can prove to the tax man that this was the estimated value of the item at the time of donation.

Cash gifts

Many people like to make cash gifts to charity. No matter how big or small the value of the gift is, if you are planning to claim this amount on your tax forms, you should ensure that there is a clear paper trail which shows the money leaving your bank account and entering the charities accounts. You should never give a cash gift using actual currency and then attempt to claim for it with no proof.

If you would like further advice about claiming a for charitable gifts on your tax return, you should visit a tax accountant.