How To Deduct For Charitable Contributions When Doing Your Taxes

Learn the laws and facts regarding deducting charitable contributions on your income tax, and how to make it easier.

A charitable contribution is defined as the donation of money, goods or services to a qualified charitable organization. If you get anything in return, it must be less than the value of what you gave; you can deduct the difference. Donations of time or labor aren't deductible, but expenses incurred doing so (for example, mileage) can be deducted.

In complex cases you should get professional help, but here are some guidelines to get you started.

Receipts

No receipt is needed for contributions under $250. This applies to any kind of contribution, cash, property, etc. No receipt is needed for separate contributions to the same charity, as long as each one is under $250, such as in payroll deduction from your work. You'll need a receipt for any single donation over $250, or if you donate property worth $250 or more (in this case, the canceled check isn't considered a receipt by the IRS.) The receipt must include:

1). Name of the organization

2). Amount of cash contribution

3). If a non-cash contribution, description (but not value)

4). Statement that no goods or services were provided in return, if that is the case

5). If goods or services were provided in return, description and good faith estimate of their value

6). If the organization provided entirely religious benefits in return, a statement that this was the case



The charity must provide you with a written receipt if you get any goods or services in return for your donation of $75 or more. This is called a quid pro quo contribution (example: you give $100 for a concert ticket valued at $50). Even though the deductible amount is $50, they must give you a receipt because the total is over $75.

The receipt isn't sent in with your taxes but must be available if requested by the IRS. Important: you must file Form 1040 and itemize deductions on Schedule A to deduct charitable contributions on your taxes.

Itemizing Deductions

Normally, the biggest problem in deducting contributions is that to do so, you must file Form 1040 and itemize deductions. It is often hard to qualify for itemization unless you have an unusual number of medical expenses, job-related expenses, have lost a lot of money gambling, or are a tenant who makes less than about $60,000/year. If you don't have enough expenses to itemize, see Little Things below.

Donating a Car or Boat

If you donate your vehicle you can deduct its fair market value (the amount someone would buy it for, if neither buyer nor seller were forced to buy or sell). To make sure you're legit, save a couple of classified ads showing the price of similar vehicles and a picture that shows the car's condition. If it's $500 or more, file form 8283 (Noncash Charitable Contributions). If the sale price is more than $5,000, you need to attach a copy of an appraisal by a qualified professional to your return. The IRS is cracking down on auto donation abuses, so make sure the amount you deduct is appropriate. These rules change for 2005 - if the charity sells your car, you can only deduct the amount they get for it. This new rule will apply to donation of a car, boat or plane.

Tsunami Relief

According to the IRS, contributing to aid the victims of the South Asia tsunami might be tax deductible if the charity is a domestic, tax-exempt "501(c)3" organization (a U.S. organization with full control and discretion over the fund's use). To find or verify 501(c)3's, look in Guidestar, a database of 850,000 nonprofit organizations recognized by the IRS, or on the IRS website). These deductions are made the year the contribution is made.

Little Things

1). If you gave more than 50 percent of your Adjusted Gross Income, you can only deduct 50 percent (may be lower for certain organizations). The extra may be carried forward for up to five years.

2). If you don't have enough deductions to itemize, you can bunch your expenses to itemize every other year. Some of the expenses you may be able to bunch are charitable contributions, work-related expenses, personal property tax, and medical costs.

3). It's better to give by check rather than cash, and make sure the check is payable directly to the charity, and not a person or another company.

More Info

Visit the IRS Website for more information at http://www.irs.gov.

IRS Publications: Publication 526 - Charitable Contributions, and Publication 3833 - Disaster Relief: Providing Assistance through Charitable Organizations is the ultimate authorities. These are both available on the web, and at many libraries around tax time.

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