With the holidays around the corner, you may be donating to your favorite charity. However, come tax time, there are rules regarding donations to gain a tax benefit.
Did you donate to a Qualified Charity? Gifts to individuals, political organizations, or candidates are not deductible. To check the status of a qualified charity, taxpayers can use Exempt Organizations Select Check on IRS.gov.
Did you get something in return? If you receive items such as merchandise, meals, and event tickets, the entire amount is not tax deductible. You can only deduct the amount of the donation that exceeds the fair market value of the item they received.
Did you donate something other than cash? The donation amount is the price you would get if you sold the item on the open market. Note that used clothing and household items must be in good condition. Keep receipts, list of items donated and pictures. An additional tax form is required for donations over $500. If the value exceeds $5,000, the IRS requires an appraisal. Special rules apply to certain types of property donations, such as cars and boats.
Charitable mileage. Keep track of your miles. The IRS allows 14 cents per mile.
Stock donations. The donor can claim the fair market value and not report the capital gain income.
Proper documentation? If you donate $250 or more in cash or goods, you must have a written receipt from the charity. The statement must show: amount, whether you received any goods or services in exchange for your gift. If you did receive dinner or such, the charity must provide a good faith estimate of the value of those goods or services.
Will you reduce your taxes? If the amount was donated to a qualified charity, you have documentation, your itemized deductions exceed $6,050 for singles or $12,500 for those married and the amount donated is less than 50% of your income; then yes most likely you will reduce your taxes.
If you are still confused or need to know more – give Jimmy a call at 920-351-4842 or use the Interactive Tax Assistant, Can I Deduct my Charitable Contributions? at www.IRS.gov.
By Mary Guldan Lindstrom. CPA