Washington (Dec. 2, 2003) - Taxpayers need to keep in mind some simple steps to make sure they benefit from their donations to tax-exempt charitable and religious groups, according to the Internal Revenue Service.
The tax benefit for charitable contributions is only available for taxpayers who itemize deductions — about one-third of all filers. Those who take a standard deduction receive no additional tax benefit for their contributions. In 2000, the last year for which complete data is available, about 37.5 million taxpayers made deductible charitable contributions totaling nearly $140.7 billion. Of these gifts, nearly $98.2 billion were cash donations.
Only contributions actually made during the tax year are deductible. For example, if a taxpayer pledged $500 in September but paid the charity only $200 by Dec. 31, the 2003 deduction would be $200. However, credit card charges and payments by check are included in the year they are given to the charity, even though the taxpayer may not pay the credit card bill or have the bank account debited until the next year.
Those itemizing deductions reduce their taxable income by the total contributed to qualified tax-exempt organizations, with some limits. The tax saving usually equals the deduction times the marginal tax rate — the top rate for the person's income level.
The IRS also reminds taxpayers to keep appropriate records to substantiate the value of their gifts. For example, for any single gift of $250 or more, a taxpayer must have a written acknowledgement from the charity by the earlier of the date the person files the tax return or the filing deadline, including extensions. A person donating property valued at more than $5,000 must obtain a qualified written appraisal.
-- WebCPA staff
