If you’re making holiday donations to your favorite charities, you’re in for more than good karma. The IRS just sent out a newsletter outlining the tax benefits to giving and offering several tips to keep in mind.
First, the Reminders
- Contributions must be in good condition or better to be tax deductible. We all know people who donate their old, stained clothes or broken household appliances. These items aren’t very useful, and the IRS doesn’t deem them worthy of a deduction. Alternatively, you can include a qualified appraisal of your items with your tax return.
- You’ll need a written acknowledgement (with descriptions of the items) from the charity for all gifts worth $250 or more.
- For monetary donations, you need a bank record or written statement from the charity, with the name of the charity, date, and donation amount. Canceled checks, bank statements and credit card statements all count. For payroll deductions, keep a copy of your pay stub.
- The charity must be an eligible organization. You can look up your charity here. All churches, mosques, temples, and synagogues are eligible regardless of whether they are in the list the IRS provides.
- If the amount of your deduction for noncash contributions is over $500, you’ll need to submit a properly-completed Form 8283 with your tax return.
Now, the Tips
- Contributions are deductible in the year made. So if you want to get a deduction in for this year but don’t have the money in the bank, simply use a credit card before December 31st, 2015. As long as checks are mailed in 2015, they also count.
- Itemize your deductions. Only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. So if you go with the standard deduction, you won’t be able to take advantage of the charitable donation deduction.
- Keep accurate records. If you are ever audited, you will be required to show the proper paperwork/receipts.
- Remember that you can donate cars, boats, and planes. The deduction is usually limited to the gross proceeds from the sale, and Form 1098-C or a similar statement must be provided to the donor by the organization and attached to the donor’s tax return.
Donating has many benefits, not the least of which is a nice tax deduction. If you have questions about your giving, get in touch and we’ll schedule a time to talk.