Giving to charities is a worthwhile endeavor in its own right, but it also has the added benefit of reducing your taxes at the end of the year. The following are some tips to make sure you do it right so that your donations will meet the IRS's requirements when you file your tax return.
Clothing and Household Items
To be deductible, clothing and household items must be in good used condition or better when donated to a charity. A item for which a taxpayer claims a deduction of more than $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Donors must get a written acknowledgement from the charity for all gifts worth $250 or more that includes, among other things, a description of the items contributed. Generally, a taxpayer should get a receipt for all such contributions, which describes the
For monetary donations, a taxpayer must have a bank record or written communication from the charity showing the amount of the donation, the date and the name of the charity. Bank records include canceled checks, bank or credit union statements and credit card statements, all of which should show the name of the charity, the date and amount paid. The same holds true for credit card statements, as well as the posting date.
Monetary donations include those in cash or by check, electronic funds transfer, credit card and payroll deduction.For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document showing the name and total amount withheld for the charity by the employer.
Keep in mind the following:
- Contributions are deductible in the year made so that donations charged to a credit card before the end of 3013 will be deductible in 2013 even if the bill isn't paid till next year.
- Only donations to qualified organizations are tax-deductible, which includes churches, synagogues, temples, mosques and government agencies. The IRS maintains a online database that lists most organizations that are eligible to receive deductible contributions. For Exempt Organization Select Check, go to www.irs.gov.
- For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions.
- If you donate a car, boat or an airplane to a charity, the deduction is usually limited to the gross proceeds from its sale. If the claimed value is more than $500, Form 1098-C or a similar statement must be provided by the donor organization and attached to the donor's tax return.
- If the amount of a taxpayer's deduction for all non-cash contributions is more than $500, a properly completed form 893 must be submitted with the tax return.
- There isn't much time left in 2013, so your donations must be made before the end of the year if you want to realize a tax deduction. If you have any questions, contact your financial adviser.