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The American charitable spirit is commendable and admirable, to say the least. It is perhaps more eloquent to show this in figures than with adjectives, so here are a few interesting statistics: in 2014 alone Americans gave $358.38 billion, which accounted for 2.1% of gross domestic product for the year;, and the average annual household contribution is $2,974.
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Of course, we should also acknowledge that each of those respectable donors is also aware that charitable contributions are tax deductible.
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- To make deducting charitable contributions easier for you, here are a few useful tips you should take into account with all your charitable acts.
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First of all, make sure any charity you are giving to is a qualified organization. Only donations to eligible organizations are tax-deductible. Select Check, a searchable online tool available on IRS.gov, lists most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible even if they are not listed in the tool’s database. We should mention that you can't deduct contributions to specific individuals.
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Only if you itemize your deductions on Form 1040 Schedule A you can claim gifts to charity. Thus, if you choose the standard deduction you cannot deduct your charitable contributions. This includes anyone who files a short form (Form 1040A or 1040EZ).
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You will have a tax savings only if your total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. You can use Form 1040, Schedule A to determine whether itemizing is better than claiming the standard deduction.
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For monetary donations you must have a bank record or a written statement from the charity in order to deduct any donation of money, regardless of amount.
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Under the record-keeping rule effective for all cash, check, electronic funds transfers, credit card charges, or other monetary contributions of any amount made in taxable years beginning after August 17, 2006, the donor must obtain and keep a bank record or a written communication from the donee as a record of the contribution. Written records prepared by the donor (such as check registers or personal notations) are no longer sufficient to support charitable contributions. Bank records for this record-keeping requirement include bank or credit union statements, canceled checks, or credit card statements. They must show the date paid or posted, the name of the charity, and the amount of the payment.
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| Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document furnished by your employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity. |
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| Besides Schedule A, taxpayers who give property to charity usually must attach a special form for reporting these noncash contributions. If the amount of the deduction for all noncash contributions is over $500, a properly-completed Form 8283 is required. |
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Charitable contributions of clothing and household items (including furniture, furnishings, electronics, appliances and linens) generally must be in good used condition or better to be tax-deductible. This requirement does not apply to contributions of food, paintings, antiques, other art objects, jewelry and gems, or collections, and does not apply to a contribution of an item for which a deduction of more than $500 is claimed if the taxpayer obtains a qualified appraisal of the item. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return.
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For claimed contributions over $5,000, generally a qualified appraisal prepared by a qualified appraiser must be obtained.
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| Special reporting requirements generally apply to vehicle donations, and if you wish to claim such donations you must attach any required documents to your tax return. The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return. |
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| Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2015 count for 2015, even if the credit card bill isn’t paid until 2016. Also, checks count for 2015 as long as they were mailed in 2015. |
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| For all of you, keeping good records is key to qualifying for the full charitable contribution deduction allowed by law. In particular, this includes insuring that you have received required statements for two contribution categories—each gift of at least $250 and donations of vehicles. |
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| In general, contributions to charitable organizations may be deducted up to 50 percent of adjusted gross income computed without regard to net operating loss carrybacks. Contributions to certain private foundations, veterans organizations, fraternal societies, and cemetery organizations are limited to 30 percent adjusted gross income (computed without regard to net operating loss carrybacks), however. |
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If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive.
Although you can't deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. The amounts must be: unreimbursed, directly connected with the services, expenses you had only because of the services you gave, and not personal, living, or family expenses. |
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| You can also deduct as a charitable contribution any unreimbursed out-of-pocket expenses, such as the cost of gas and oil, directly related to the use of your car in giving services to a charitable organization. You can't deduct general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance. |
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| As simple as charity donations may seem, with all the rules and regulations in place, it is far better to get help from a tax professional in determining all the tax deductions you are entitled to, as well as in all your dealings with the IRS. |
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