Things You Need to Know About Deducting Charitable Contributions

The IRS has recently published tips for taxpayers who wish to deduct their charitable contributions from their tax bill.

First, people who seek a tax deduction must donate to a qualified charitable organization.  Donations you make directly to an individual(s), even when they are truly in need, are not deductible.  Any contributions to a political organization or a political candidate are not deductible.

Some organizations have both a political arm and a charitable foundation.

In those cases be sure which one you are donating to.

If you want the deduction you must file Form 1040 and itemize your deductions on Schedule A. If you claim more than $500 in noncash contributions in the year, you must also file Form 8283, Noncash Charitable Contributions, with your tax return.

Many of us attend charitable fundraisers where we get some sort of benefit (such as a meal or tickets to a concert).  In those cases, you can only deduct the amount that exceeds the fair market value of the benefit you received.  The fair market retail value of any goods or services you received must be subtracted from the contribution that you claim on your taxes.

If you donate stocks, bonds, or precious metals you can deduct the amount that the donation was worth on the date that you made it.  Any non-cash property is usually valued at its’ fair market value.  To claim used clothing and household items they generally must be in good condition to be deductible. There are special rules that apply to donations of cars, trucks, motorcycles, airplanes, RVs, and boats.

The IRS defines fair market value at generally the price at which someone can sell the property.

The IRS requires written documentation of any cash donations that you claim in order to deduct it.  That record can be a written statement from the organization, your bank records, or records of payroll deductions.

That documentation must include the name of the organization, the date and the amount of the contribution.

If you claim a deduction for gifts of cash or property worth $250 or more, you must have a written statement from the qualified organization. That statement must show the amount of the cash or a description of the property given.  If you received any goods or services from that organization in exchange for your gift that must also be stated on the statement.

If you are making the donation of one property worth $5000 or are claiming donations of $5000 or more for a group of similar items valued at more than $5,000, the IRS requires that you must also complete Section B of Form 8283. This section generally requires that you provide an appraisal from a qualified appraiser to justify that high value.

For more information on taxes or tax planning or to set up an appointment, call 205-451-1945.