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Monday, April 6, 2015

Money Method: Eight Tax Tips to Deduct Charitable Contributions

(Clothes Donation Bin in Montclair, NJ
Image taken by T.C.)
Remember that donation you gave to that charity a few months ago? What about the clothes you donated in the donation bin, or the Salvation Army and Goodwill? Well, if you saved your receipts they may help you this tax season.  Depending on how much you donated in 2014, you can claim the gift as a deduction which may lower your tax. The IRS provided eight tax tips you should know about when it comes to deducting your gifts to charity:

1. Qualified Charities. You must donate to a qualified charity if you want to deduct the gift. You can’t deduct gifts to individuals, political organizations or candidates. To check the status of a charity, use the IRS Select Check tool

2. Itemized Deduction. To deduct your contributions, you must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with your federal tax return. 

3. Benefit in Return. If you get something in return for your donation, your deduction is limited. You can only deduct the amount of your gift that is more than the value of what you got in return. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.

4. Donated Property. If you gave property instead of cash, the deduction is usually that item’s fair market value. Fair market value is generally the price you would get if you sold the property on the open market.

5. Clothing and Household Items. Used clothing and household items must be in at least good condition to be deductible in most cases. Special rules apply to cars, boats and other types of property donations. See Publication 526, Charitable Contributions, for more on these rules. 

6. Form 8283. You must file Form 8283, Noncash Charitable Contributions, if your deduction for all noncash gifts is more than $500 for the year. 

7. Records to Keep. You must keep records to prove the amount of the contributions you made during the year. The kind of records you must keep depends on the amount and type of your donation. For example, you must have a written record of any cash you donate, regardless of the amount, in order to claim a deduction. For more about what records to keep refer to Publication 526

8. Donations of $250 or More. To claim a deduction for donated cash or goods of $250 or more, you must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether the organization provided any goods or services in exchange for the gift. Refer to Publication 561, Determining the Value of Donated Property, to figure out how to much your goods are worth. 

FYI ...You can get IRS tax forms and publications on anytime. You can stay abreast of tax information through the IRS Social Media sites or do like I did and subscribe to IRS Tax Tips or any of its e-news subscriptions

Do you have a tax tip you like to share? Respond in the comment box.

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