It’s that time of year again! As April approaches quickly, Americans across the country are firing up TurboTax, collecting W-2s and 1099s, and getting ready to file their taxes!
Sure, tax season is dreaded by most people – but if you play your “cards” right, you could end up getting some serious tax breaks, and maximizing your tax refund. How? Well, there are plenty of ways – but one of our favorite ways has to do with gift cards!
In this article, we’ll discuss the basics about donating your gift cards, and getting a tax break for your donations. Read on, and learn about the most frequently-asked questions about donating your gift cards this tax season!
Can I Get A Tax Break For Donating My Unwanted Gift Card?
Gift cards are worth their entire balance for tax purposes. If you have a $100 gift card, for example, and you donate it, you are eligible for a $100 deduction on your taxes! This makes donating gift cards a great way to do some good, and get a tax break simultaneously.
In fact, this can be a really good way to get rid of some gift cards that you don’t want. You can always sell Target gift cards, sell Apple store gift cards, and sell Nordstrom gift cards online to EJ Gift Cards – but what about cards to smaller retailers?
If you have a local gift card, or one that is not accepted by a retailer near you, you may not even be able to sell it online – and you’re stuck with a useless, valueless gift card. This is obviously not ideal.
In this case, donating it to a charitable organization is a fantastic idea. Say you have a gift card that’s only redeemable at a local food truck or restaurant with one location, and you don’t want it.
You probably can’t sell it online – but if you donate it to a local homeless shelter or another nonprofit organization, they will be able to use it! They will be able to use the full value of your gift card, or even re-sell it if they find a buyer, and use the money for whatever they want.
And you’ll get the full value of the gift card as a tax break. Depending on your tax bracket, this could be worth 30-40% of your gift card’s face value – or more!
Are All Gift Card Donations Tax Deductible?
As long as you are donating to a nonprofit 501(c)(3) organization or another charity, your gift card donation should be tax deductible. However, it may sometimes be hard to determine whether or not a charity is actually a nonprofit.
If you have questions about whether or not a particular donation to a charity is tax deductible, there are a few ways to find out. You can ask an employee if they are a non-profit, and ask for proof of their status. Usually, they will provide you with a copy of the IRS exemption letter for their organization. This is the easiest way.
You can also call the IRS at 1.877.829.5500 and ask them about the non-profit status of a particular organization, though this will probably take a while (especially during tax season).
Another option is to use a third-party website like Charity Navigator. Charity Navigator allows you to look at the nonprofit status, mission statements, financials, and more of top charities. This will help you find an eligible charity that aligns with your ideals and your beliefs – and is tax exempt.
Before You Donate – Remember That You’ll Need To Itemize!
There is a bit of a catch when it comes to charitable donations and tax writeoffs – you can’t simply accept the “standard deduction” on your taxes if you want to get a tax break.
Instead, you will have to itemize your taxes using Schedule A. Most Americans don’t do this – nearly 70% of Americans simply accept the standard deduction, rather than itemizing their expenses.
For most people, this makes sense. They probably won’t get a bigger tax break by itemizing their deductions, and keeping track of all that paperwork takes a lot of time.
However, if you have a higher income, or you donate quite a bit of your gross income or are eligible for other deductions, it’s a good idea to itemize your tax deductions. And if you want to donate a gift card to charity, you will need to itemize your deductions in order to benefit from any kind of tax break.
Not sure if you should itemize? Take a look at this helpful article by TurboTax. It will help you understand if itemizing is right for you, and break down the basics of the process.
Who Will Accept My Gift Card As A Donation?
Just about every local charity is willing to accept your gift card as a charitable donation. You can head to a local charity like the Salvation Army, Goodwill, or a local homeless shelter, soup kitchen, food pantry, or a church.
You can also donate your gift card to your school or school district for a tax break – but only if it is a public school that does not operate for a profit. Private schools and charter schools may accept gift cards as donations – but they will not be eligible for any kind of tax break.
If you’re ever unsure about whether or not an organization will take your gift card, simply give them a call and ask to speak to an employee. Ask what gift cards they take, and what other donations they need – you’re sure to get the clarification you need.
What Documents Do I Need To Write Off My Gift Card?
As mentioned above, the first thing you’ll need to do is itemize your deductions on your tax return. But that alone is not enough – if you get audited, you will need to provide some kind of proof-of-donation to the IRS, and it’s a good idea to always keep these records for yourself, in any case.
According to the IRS, the requirements for the donation of a gift card are the same as a cash donation. Gift cards are considered the equivalent of a cash, check, or money order when it comes to donation documentation requirements. Here are the documentation requirements, directly from the IRS website.
You must maintain a record of your contribution in the form of a bank record, such as a canceled check or a bank statement, or a written communication from the charity.
A written communication is what you’ll need, since a gift card is not going to show up on your bank statements. This written communication must have:
- The name of the charity
- The date of the charitable contribution
- The amount of the contribution
As long as the letter fulfills all of these requirements, you will be able to deduct your gift card from your taxes. You can simply ask an employee to type up a quick letter on their official letterhead, and print it out for your records.
Even a scrap of paper with these three pieces of information on it will count as a record of your gift. You should also get the tax ID number and the signature of an employee, if you can – this will help ensure that everything is above-board for your donation.
If you expect to get a tax break for your donation, you must make sure that you have some kind of receipt. If you don’t get one, you won’t be able to legally deduct the donation from Schedule A on your tax return – and if you get audited, you could be in hot water with the IRS.
The Best Gift Cards To Donate To Charities
Generally, you can expect pretty much any gift card to be appreciated by a charity. They’re unlikely to turn down any gift card. Whether you were going to sell a GAP gift card, but decided to donate it to a homeless shelter instead, or you have a few extra Starbucks gift cards lying around, you can give them to pretty much any charity.
However, there are a few gift cards that are going to be ideal for charitable giving, as they are easy to use, and offer charities the chance to either redeem them for valuable and useful merchandise, or to resell them for cash. Here are some of the best choices.
- Target, Walmart gift cards – Gift cards to big retail chains like Target, Walmart, Meijer, and other large retailers are always very useful to charities. A homeless shelter could use them to buy blankets and bedding, a soup kitchen could use them to buy groceries, and an after-school program could use them to buy a new TV or gaming system to keep kids entertained.
- Amazon gift cards – Amazon gift cards are incredibly useful, as they can be used to purchase an enormous variety of different items. And because Amazon has very low prices, charities will be able to stretch their dollar further.
- Clothing retailer gift cards – Whether it’s to a big department store like Kohl’s, Nordstrom, or Ross, or a smaller retail outlet such as Nike, clothing gift cards are often very valuable, especially for homeless shelters and other charities for the needy.
- Grocery store gift cards – Gift cards to large chains like Giant Eagle, Kroger, Stop N Shop, and other supermarkets are always valuable for charities – particularly for soup kitchens, homeless shelters, and food pantries.
- VISA, MasterCard, American Express gift cards – These “open loop” gift cards essentially function identically to cash, so they are very valuable for every kind of charitable organization.
Other gift cards to restaurants, furniture/electronics retailers, and other stores will also be welcomed by a charity – but these 5 categories are the most valuable and useful for the vast majority of categories.
Top Online Charities For Donating Gift Cards
Have a gift card that you want to donate, but not sure where to start? If you don’t feel like doing research and finding a local charity to which you can donate your card, you have another option – donating your gift cards online!
Here are some of our top picks for donating your gift cards online, from the comfort of your own home.
- Charity Gift Certificates – This website lets you choose between over a thousand different charities, and accepts gift cards of all values – even ones that have been partially spent. They accept hundreds of brands online, and even more if you choose to mail in your physical gift card.
- Gift Cards 4 Change – Gift Cards 4 Change is a nonprofit headquartered in Dallas, TX. They focus on charitable giving to help people affected by hunger, poverty, homelessness, disability, and human trafficking – both in the U.S., and around the world. All donations are 100% tax deductible.
- Kars4Kids – Kars4Kids primarily takes donations of used vehicles, but also offers a gift card donation program. You can submit your card online, or through a prepaid envelope that is sent to you. Your donation will be used to fund schools, community programs, and other charitable organizations focused on children.
Take a look at a few of these websites, and do some of your own research. We’re sure you’ll find an organization that’s perfect for your donation!
Got More Gift Cards You Don’t Need? You Can Sell Them On EJ Gift Cards.com!
If you have quite a few gift cards that you don’t need, you may not want to give them all away. If that’s the case, don’t worry! You can sell them for cash at EJ Gift Cards today. We accept hundreds of different gift cards, and we pay market-leading prices for them via PayPal.
This is also a great way to turn your donation into cash if you don’t feel like donating a gift card directly. Sell your gift card, and use the money for a cash donation to your favorite charity!
And if you’re still in the giving mood, you can also buy gift cards from EJ Gift Cards at a discount. Then, you can give them to charities – and you can get a deduction for the full remaining balance of the card, which gives you an even bigger tax break.