Tax Consequences Of Charitable Contributions
When you give a gift to a charity that helps the lives of others in need. It may also help you at tax time. You may be able to claim the gift as a deduction that may lower your tax.
Here are seven tax tips about deducting your gifts to charity.
1. Qualified Charities
For your donation to be a valid tax deduction, you must contribute to an organization on the IRS’s list of qualified charities. Many major charities and religious groups are on the list.
If you get something in return for your donation, your deduction is limited. You can only deduct the amount of your gift that is more than the value of what you got in return.
Examples of benefits include meals, merchandise, tickets to an event and services.
3. Non-Cash Charitable deductions
Use the following guidelines to deduct non-cash charitable contributions:
Calculate the fair market value of any clothing, goods, furniture or any other items you donated.
If the total amounts to more than $500, fill out Form 8283.
For vehicles the charity sells, you need to use either the fair market value or the actual sale proceeds, whichever is less.
You should receive a 1098 C from the charity for any vehicles you’ve donated.
All totals go on line 17 of the Schedule A form for itemized contributions.
You must keep records to prove the amount of the contributions you made during the year. Keep all bank records or receipt.
5 .Itemized Deduction.
To deduct your contributions, you must file Form 1040 and itemize deductions.
6. 250 or more.
To claim a deduction for donated cash or goods of $250 or more, you must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether the organization provided any goods or services in exchange for the gift.
7. Good Condition.
Used clothing and household items must be in at least good condition to be deductible in most cases. Special rules apply to cars, boats and other types of property donations.
It feels good to give to charitable causes, but it’s certainly nice that the federal government rewards citizens who are generous with their donations.
Donating to a non-profit organization allows you to choose where your money goes in order to improve communities and society as a whole.
If you have questions, feel free to reach us for advice.
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