For Mark Roberts’ Use: As the end of the year approaches, the holiday spirit might take over. You’re feeling festive – and generous. Giving to charity feels right, but it can also net you some significant savings on your taxes, via the charitable giving tax deduction. Before you start writing checks, make sure you’re taking the right steps to make allowable gifts according to the IRS.
Make sure that organization qualifies. You can’t claim a tax deduction for giving money to just any organization. Contributions to individuals, political organizations, or candidates do not qualify. The organization must be qualified by the IRS, as outlined in IRS Publication 526, in order for your gift to count as a tax deduction.
Non-cash donations can only be counted at their fair market value. If you donate stock, for example, you should deduct its current fair market value and not its original purchase price. Clothing and household goods must be in good used condition, and you can only claim their depreciated values – not the price you paid for them as a new purchase. If your non-cash contributions total more than 500 dollars, you must complete and attach IRS Form 8283.
Get an appraisal. If you donate a non-cash item, or grouping of similar items (such as a collection) that is worth more than $5,000, you must complete section B of Form 8283 and attach a qualified appraisal of the item(s).
Keep adequate records. Do not attempt to claim a deduction for charitable giving unless you kept accurate records of your gifts! Otherwise, if your return is audited, the IRS will throw out these deductions and you could owe them more money. Ask for a receipt which states the name of the organization, the date, and the amount of your contribution. If you make contributions by credit or debit card, your account statements will suffice as proof.
File for your deduction correctly. When it’s time to file your taxes, use Form 1040 and itemize your charitable donations on Schedule A.
Finally, remember that if you receive any items in exchange for your charitable contribution, you have to deduct their value from the amount you contributed. For example, if attend a charity auction and bid $2,000 on a painting worth $1,000, you can only claim a $1,000 tax deduction.
If you have any more questions about charitable contributions, or financial planning in general, call our office and we will be happy to help.