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.
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"Generosity is its own reward, but that doesn't mean you should miss out on the tax benefits of your gifts," says Justin Ransome, a partner in accounting firm Grant Thornton's National Tax Office, in a press release. "Many people don't realize how detailed the charitable giving rules actually are."
Deduction timing: check vs. charge
According to Grant Thornton, 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 happened, and pledges cannot be deducted until the payment is accepted. So if you forget to drop a check in the mail until after the New Year, you'll lose the deduction for 365 days.
Most charitable agencies large and small heartily accept credit card donations. Large charities such as the United Way have dramatically expanded their humanitarian reach by letting supporters make pledges through one-time or monthly payments charged directly to a Visa, MasterCard, Discover or American Express credit card. Even the Salvation Army has begun to accept credit card gifts.
Cash back for your kindness?
Depending on the type of card, you can earn airline miles, cash back and other credit card rewards that you can either enjoy yourself or donate to family, friends or a charity, although rewards and points are typically not considered tax deductible.
You can, of course, use your regular card to donate to a variety of charities, but some issuers have created credit cards to support specific charitable organizations.
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Cause credit cards automatically donate a portion of each transaction to the charity linked to the card. Some are branded with the organization, like Bank of America's American Heart Association and Chase's World Wildlife Fund cards; others allow you to steer the donation to the cause of your choice. You can support your child's public school through Target's REDcard Take Charge of Education program or split the money between up to five Israel-related charities through the HAS Advantage Visa Platinum card.
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. Sometimes when scammers steal someone's credit card numbers, they will donate a dollar to charities using the card to make sure that the card 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.
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