As tax season enters its last two weeks, the IRS has offered a number of tips on how taxpayers can make sure that their charitable gifts also lower their tax liability.
Among the tips:
- The deduction must be to a qualified charitable organization. It cannot be to an individual, a political organization or a political candidate.
- Deductions must be itemized on Form 1040 Schedule A. if the total for the year for non-cash contributions exceeds $500, the taxpayer must file Form 8283, Noncash Charitable Contributions, with the return.
- The value of any benefit to the taxpayer in return for the contribution must be deducted from the amount of the contribution.
- Stock and other non-cash property are usually valued at fair market value. Used clothing and household items must generally be in good condition to be deductible. Special rules apply to vehicle donations.
- Deductions of cash gifts (including those made by check or other monetary methods), regardless of the amount, must be substantiated by a written record. Documentation should include a written statement from the organization and a bank record or a payroll deduction record that substantiates the donation. The documentation should include the name of the organization, and the date and amount of the contribution. Telephone bills satisfy this requirement for gifts made by texting, so long as it shows this information.
- To claim a deduction for gifts of cash or property worth $250 or more, there must be a written statement from the qualified organization showing the amount of the cash or a description of any property given, and stating whether the organization provided any goods or services in exchange for the gift.
- The same document may be used to meet the requirement for a written statement for cash gifts and the requirement for a written acknowledgement for contributions of $250 or more.
- If one item or a group of similar items are donated that are valued at more than $5,000, Section B of Form 8283 must be completed, usually by a qualified appraiser.
For more information, the IRS recommends its Publication 526, Charitable Contributions.