In December, many of us increase our charity giving. Some reports reveal that 75% of taxpayers in the U.S. donate to charities during this last month of the year.
If you want to support a favorite charity and lower your taxes, you need to follow a few rules. You must:
- Itemize your deductions. In order to get a tax deduction for your donation, you must itemize your deductions. You cannot take the standard deduction and claim charitable contributions on your tax return.
- Donate to a qualified organization. You can only claim donations to an organization the IRS recognizes as a qualified organization. Qualified organizations include recognized charities such as the Red Cross, United Way, Boys/Girls clubs, religious groups, etc. To access the database of organizations the IRS considers as qualified to receive tax-deductible contributions, visit this link.
- Document your donation. IRS regulations require that you have a written receipt for all monetary donations. You can use a canceled check (or a credit card statement) as your documentation. Today, most charities will provide a receipt to individuals donating money, regardless of the amount. If you donate $250 OR MORE you must have a letter from the charity in your possession. The letter must state the value of the donation and that you did not receive any goods or services or a valuation of the goods or services, which you cannot deduct.
- Get a written appraisal for a high-value property donation. You can donate items to charities and deduct the value of the item. If the item is valued at more than $5,000, you must get a written appraisal of the property. For any non-cash donation higher than $500, you must complete Section A of Form 8283. If the non-cash donations exceed a value of $5,000, you must complete Section B of Form 8283.If you are donating a car, the days of using the Kelly Blue Book value to determine the deduction value of your old clunker are long gone. The charity recipient of your donated vehicle must let you know how they used the vehicle. If they sold it, they must tell you the price they received for it.While most folks donate autos, these donation rules also apply to RVs, motorcycles, boats and airplanes. When you donate any auto or motorized machine, you must complete Form 1098-C.
Some Overlooked Charitable Contributions
You can deduct money you incur serving a charity
If you spend a lot of time in your car to help a charity, you can deduct mileage, parking, and tools as part of your charitable contribution. You can also deduct many of your out-of-pocket expenses such as supplies, uniforms, dry cleaning, postage, etc.
You can deduct donations of other in-good-shape items.
You can donate clothing, household items, toys tools, etc. To deduct the item’s value, it must be in good used condition. Turbo Tax has created a very useful online tool and an app called “It’s Deductible”.
You can use the Its Deductible tool to track and calculate the IRS-approved value donations throughout the year not just in December.
You can donate stocks.
If your portfolio includes stocks, which have appreciated, and you no longer want to hold them, you can donate the stocks to a charity. You can deduct the full value of your stocks and avoid capital gains on the appreciated value.
Timing of Your Donations
If you want to claim your donation on your 2016 taxes, you must make the donation (or charge on your credit card) by Dec 31, 2016. If you send a check written by Dec 31 to a charity and they don’t deposit it until 2017, you still deduct the contribution in 2016.
Happy New Year to all our readers!
Contact us if you have any tax questions in 2017.