Top Tips for Deducting Charitable Donations

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Top Tips for Deducting Charitable Donations

There are two big reasons why everyone should donate to charity. First, it makes you feel good knowing that you helped others in need. Second, you can deduct your charitable contributions which may help lower your tax bill. Here are the top tips to ensure your contributions pay off on your tax return:

1. If you want to get a tax deduction, you must donate to a qualified organization. A qualified organization is one that is organized and operated exclusively for a nonprofit purpose under Section 501(c)(3) of the Internal Revenue Code, and none of the organizations earnings may inure to any private shareholder or individual. In addition, the organization may not attempt to influence legislation as a substantial part of its activities or participate in any campaign activity for or against political candidates.

2. To deduct your charitable contributions, you must itemize your deductions on Schedule A of your Form 1040 tax return.

3. If you receive a benefit in exchange for your deduction, you can only deduct the amount of the donation that exceeds the amount of the benefit. For example, if you purchased a ticket to a charity dinner for $100 and the dinner was worth $40, you can only deduct the difference – $60.

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4. Make sure you know the value of your donation. Donations of stock and other non-cash property are generally valued at the fair market value of the property. Other donated items like clothing and household items must generally be in good used condition in order for you to deduct the value of these items.

5. Determining the fair market value of an item requires you to determine what a willing buyer would pay a willing seller for the item, having all relevant facts about the item.

6. If you deduct a monetary gift, you must always maintain a bank record regardless of the amount donated. This includes records from the organization with the name of the organization, the date of the donation and the amount of the donation. For text message charitable donations, your telephone bill would be a sufficient record as long as it shows the name of the recipient organization, the date of the donation and the amount.

7. If you want to deduct donations worth $250 or more (cash donations or donations of property), you must have a bank record, payroll deduction record or other written acknowledgement from the qualified organization showing the amount of the donation and whether the organization provided any benefit in return for the donation. If the total amount of your non-cash deductions for the year exceeds $500, you must complete Form 8283, Noncash Contributions, to your tax return.

8. If you donate an item or a group of similar items valued at $5,000 or more, you typically must have the items appraised by a qualified appraiser and complete Section B of Form 8283.

For more information, read my article How Do I Deduct Contributions Made To Charities?


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