Ask An Accountant-Charitable Contributions

It’s tax time! My “Ask An Accountant” series should help with many questions that may arise. Remember, if you have a tax question, email my husband who is an experienced accountant at cjwtaxpro@gmail.com.

Charitable contributions can reduce your tax bill.  Here are some guidelines for making the contribution:

1. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations or candidates.
2. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must complete and attach Form 8283 to your return.
3. If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.
4. 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 used condition or better to be deductible. Special rules apply to vehicle donations.  It is also recommended you have photos of the items donated for your records.
5. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither are coerced, and both having reasonable knowledge of all the relevant facts.
6. 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 and the date and amount of the contribution. For text message donations, a telephone bill meets the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution and the amount given.
7. 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, 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.
8. 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.

Please keep in mind this post is for informational purposes only and answers given are very general. Do not rely on this column for definite tax answers as many things depend on individual circumstances. Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

IRS Circular 230 Notice: Any U.S. tax advice in this written or electronic communication was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

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