If you’re one of the thousands of concerned people giving to charitable organizations for, say, the flood victims in Serbia and Croatia, remember that your donations may be tax deductible. The following eight tips will help ensure that your contributions pay off on your tax return:
- To protect yourself against scammers as well as to get the tax deduction, be sure to give to a qualified organization. Donations made to specific individuals, political organizations, and candidates do not qualify.
- File IRS Form 1040, and itemize deductions on Schedule A.
- If you receive a benefit – such as merchandise, tickets to a ball game, or other goods and services – because of your contribution, then you might be able to deduct only the amount exceeding the benefit’s fair market value. But if you follow some specific guidelines, you could deduct the entire amount.
- Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good condition to be deductible. Special rules apply to vehicle donations.
- Fair market value is generally considered the price agreed on by both the buyer and the seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
- Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, make sure you have a receipt showing the name of the organization and the date and amount of the contribution. Other records, such as bank statements or payroll deduction stubs, may also be sufficient.
- For donations of cash or property equaling $250 or more, you should also obtain documentation reflecting whether the organization provided any goods or services in exchange for the gift. And if your total deduction for all noncash contributions for the year is over $500, complete and attach IRS Form 8283, Noncash Charitable Contributions, to your tax return.
- Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.
Remember that your contributions may not only be tax-deductible, but they also bring about good karma. And if you’re ever uncertain as to the tax ramifications of donating, give us a call at Law Offices of Christy Lee, P.C. We’ll be happy to discuss how to get the maximum deductions from your good deeds.