Charitable donation by credit card gives quick tax deduction
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The end of the year is the time to consider wrapping up your charitable donations to qualify for the current year’s tax deduction, and there’s no quicker way to donate than with a credit card.
If you are looking for a last-minute deduction this year by giving to charity, here’s what you need to know:
“Individual taxpayers seeking to support a cause close to their hearts can not only make a positive philanthropic impact, but also receive tax benefits for their donations,” the RKL CPA firm says in its “4 keys to tax-smart charitable giving.”
What’s important is to make sure you substantiate your donations. Cash donations must be substantiated by the charity. In some cases, a canceled check or credit card receipt is sufficient, as long as it shows the name of the charity, date and transaction posting date, per the IRS.
For donations of more than $250, additional substantiation rules may apply. For the purposes of your return, the Internal Revenue Service considers credit card donations the same as cash contributions, which are the simplest deductions to claim on your return. You may save more in taxes by donating property instead, but the rules for donating property – and claiming it on your return – are more complicated.
If you contribute to charities by check, those donations can be deducted in the year they are mailed. Contributions by credit card are valid the year the charge occurred, while pledges cannot be deducted until the payment is accepted.
Credit card contributions can still count toward your 2017 deductions, even if the charges aren’t paid off yet, according to the IRS. That makes cards ideal for last-minute donations: If you’re away from stamps but near your wallet and a computer, you can donate by credit card.
How to donate by credit card
- Send your donation by using your card. You can go directly to the website of your charity of your choice. Charities have expanded their humanitarian reach by letting supporters make pledges through one-time or monthly payments charged directly to a credit card.
- Texting donations also is common now, as was seen with relief efforts in the wake of Hurricanes Harvey, Irma and Maria and the wildfires in California.
- Deducting charitable contributions requires you to file Form 1040 and itemize the deductions on Schedule A.
- Depending on the type of card, you can also earn airline miles, cash back and other rewards that you can either enjoy yourself or donate to family, friends or a charity. For example, the U.S. Bank FlexPerks Travel Rewards Visa Signature card awards 2x points for donations to charity (until Dec. 31, 2017, donations using the card earned 3x points).
- Donations of airline miles are not typically tax-deductible, but cash back donations are, says the IRS.
Other charitable alternatives
You also can use your regular card to donate to a variety of charities, but some issuers have created credit cards to support specific charitable organizations. Examples include the Susan G. Komen® Cash Rewards Visa® credit card from Bank of America and the Charity Charge World Mastercard, which automatically donates your 1 percent cash back to a charity of your choice (or to split that 1 percent among up to three charities that you choose).
Finally, some credit cards have set up online portals that encourage you to give to charity. American Express’ Members Give, for example, lets you select from a vetted group of charities and then make a quick donation.
One important warning about credit cards and charities: If you notice a small charge on your credit card statement from a charity that you do not remember donating to, it should be a red flag. The dollar donation fraud works like this: When scammers steal someone’s credit card numbers, they will donate $1 to a charity via the card to make sure that it is still valid. They hope cardholders will shrug off the charge and not question its origin.
If you see that type of charge on your bill, it is a sign that your credit card number could be in the wrong hands. If that’s the case, call the issuer immediately and cut off the thief’s access to your money. You may be charitable, but probably you aren’t that charitable.
Still in the mood to give? Good. See the IRS’s “Tax Information for Contributors” page for details on whether and how your good deed qualifies for a tax deduction.
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