Rules for Charitable Contribution Deductions

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Charitable contributions made to qualified organizations through the year may help reduce your tax bill.  Many organizations give donors pertinent details about their tax-deductible donation including the amount that can actually be reported on your tax return.  The following tips may help ensure donation made will be beneficial on your taxes.

  • Make sure you report charitable contributions on the correct form. The IRS states that form 1040 must be used to itemize deductions using Schedule A.
  • Upon reporting the deduction, make sure it was made to a qualifying charitable organization.  Contributions reported shouldn’t be donations made to individual or political organizations.
  • There are rules to review if your contribution included a vehicle.  Clothing and other goods should be fair market value and in good condition in order for it to deductible.
  • Items received for making a contribution such as ball game tickets or services; deduct the amount that exceeds fair market value.
  • When reporting cash contributions, make sure you have proper documentation that proves the amount.  This may include bank statements, a correspondence from the organization or even paystubs if donations were made via payroll deduction.  A phone bill will suffice for text donations as long as it states the name of the organization, date of donation and the amount given.
  • Donations of $250 or more must have proper documentation such as a bank record or written notice from the qualifying organization.  You may need to report if you were given anything in exchange such as any gifts or services. Noncash donations of $500 or more should be reported on IRS Form 8283 (Noncash Charitable Contributions) and attached to your tax return.
  • If you donation was an item that valued over $5,000 an appraisal is required.  Obtain an appraisal from a qualified appraiser and report data on the IRS Form 8283 section B.

Additional details can be reviewed in the IRS Publication 526: Charitable Contributions.  Information regarding property value can be review in IRS Publication 561: Determining the Value of Donated Property.  It is important to report contributions to the best of your knowledge with honesty.  The IRS may question donations made and contact you for proof.  If you are found to have provided false information on your federal income tax return, you may face penalties.  Contact a tax professional with questions or concerns about charitable contributions made.

Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from credit cards to mortgages to how to setup an umbrella company.


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