Charitable Contributions May Help Lower Your Tax Bill

From the IRS - If you made charitable contributions to a qualified organization, it may help lower your tax bill. Here are some tips to help ensure your contributions pay off on your tax return.

To get a tax deduction, you must give to a qualified organization. You cannot take a deduction for contributions made to specific individuals, political organizations or candidates; you must file Form 1040 (IRS forms) and itemize the deduction on Schedule A.

A key thing to remember is, if you receive a benefit in connection with your contribution — such as dinner at a gala, merchandise, tickets to a ball game or other goods and services — then you can only deduct the amount that exceeds the fair market value of the benefit you received. For instance, if you make a contribution of $75 or more, the charitable organization should tell you the fair market value of any merchandise or other benefits you receive.

Stock or other non-cash donations are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.

So, what do we mean by fair market value? This is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.

Another key thing to remember is regardless of the amount, to deduct a contribution of cash, check or other monetary gift, you must maintain:

  • a bank record,
  • payroll deduction records, or
  • a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution.

If you, by chance, made a donation through a text message, a telephone bill will meet the recordkeeping requirement as long as it shows the name of the receiving organization, the date of the contribution and the amount given.

If you want to claim a deduction for contributions of cash or property equaling $250 or more, you must have:

  • a bank record,
  • payroll deduction records, or
  • a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift.

One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.

If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return. Additionally, if you claim a deduction for a contribution of noncash property worth $5,000 or less, you must fill out Form 8283, Section A.

If you donate an item or a group of similar items valued at more than $5,000, you must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.

For more information on charitable contributions, read:

These forms and publications are available at www.irs.gov or by calling 1-800-TAX-FORM (800-829-3676).

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