It’s a win-win.
Donating to your favorite charity is not only a chance to make a difference, it’s a quick way to reduce your tax burden before end of the year. Make sure your contributions pay off on your 2017 tax return and know the answers to these frequently asked questions.
Do all donations qualify as a charitable deduction?
Donations of cash or property are only deductible if given to a qualified organization. You can verify online at irs.gov/app/eos. If you aren’t sure, ask the organization. Religious organizations and governments usually qualify even if they are not included in the IRS’ database. Contributions made to politicians and political organizations are not tax deductible.
Can I deduct gifts to my kids or to an individual?
Donations made to even the most deserving individuals do not count as charitable contributions. Money handed out to the homeless, the office fund pool and GoFundMe personal campaigns are also not a write-off. However, if the cause is important to you and you want the deduction, donate through an established charity.
Is the value of my time a charitable deduction?
Like it or not, the value of your time and services are not deductible. However, most unreimbursed out-of-pocket volunteer expenses such as travel and supplies are deductible.
I put cash in the church offering, isn’t that deductible?
Your records can make or break your deduction. For contributions of cash, check or other gifts regardless of amount, you need a bank record or written communication from the charity showing its name, date and amount of contribution. A log of contributions is insufficient.
Contributions of $250 or more must have written documentation from the charity. This receipt must also state whether or not you received anything of value. Receipts that lack this simple statement are worthless – your donation could be thrown out by the IRS. You must also have your documentation in hand by the earlier of the date you file your return or its due date. Many taxpayers have lost out on charitable deductions absent these details.
How much do I deduct for noncash donations?
Clearing out the clutter in your closet can pay off. You can deduct the fair market value of your donated clothing and household items that are in good condition. You will need your acknowledgment receipt from the organization. To value your items, use helpful guides on websites such as Goodwill or Salvation Army. Take a photo of your donated items in case the IRS challenges your valuation.
Noncash contributions between $500 and $5,000 require completion of Form 8283 with your tax return. You will need the date of the donation, the date it was acquired, its original cost, its fair market value and how the fair market value was determined. Contributions over $5,000 also require a written appraisal attached to your tax return.
How does it work when you donate a car?
Instead of trying to sell your old car, donate it to charity for the deduction. For cars worth over $500, the deduction is usually limited to the charity’s gross proceeds from its sale. The organization must give you Form 1098-C or a similar statement to attach to your tax return along with filing Form 8283.
How can I maximize my donation? Consider donating appreciated property, such as stocks. If you own the property for at least a year, you can write off the fair market value of the property and avoid paying capital gains on the appreciation.
Maximize your giving and minimize your taxes by knowing the rules and guidelines when it comes to charitable giving. When in doubt, ask a knowledgeable CPA. ￼
Chris Thornburgh is a CPA and partner at Brown Armstrong Accountancy Corp. Contact her at firstname.lastname@example.org or 324-4971. The views expressed in this column are her own.