Tax Deductions

There are many advantages to giving to charity.  The tax benefits of giving to charity.

1. How Does the Income Tax Deduction for a Charitable Donation Work?

If you itemize deductions on your tax return, you may be able to take an income tax deduction for a gift to a qualified charitable organization. All taxpayers receive an automatic deduction from Uncle Sam, and it is only when you exceed that deduction that itemizing pays off. The standard deduction is currently $5800 for individuals and $11,600 for married couples filing jointly

To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.

2. When Can a Charitable Contribution Deduction be Taken?

Your donation to a qualified charity is deductible the same year in which it is made. The contribution is considered paid when you put the check in the mail, or when it is charged to your credit card (not when you pay the credit card company). Make sure that your donation is made by December 31 the year in which you plan to claim a deduction.

3. What Charitable Organizations Are Considered Qualified?

Most charitable organizations qualify for tax-deductible donations.  Look for the 501(c)(3) designation to be absolutely sure. Some organizations, such as churches or other religious groups are not required to register as IRS tax-exempt charities in order to receive tax-deductible donations. The charity will tell you if your donation is tax deductible

Tax deductions are not allowed for donations to an individual, a foreign government, foreign charities, political parties, political campaigns, or political action committees.

4. Is There a Charitable Tax Deduction for Giving Internationally?

If the charity is registered in the U.S. as a charitable organization, you can take a deduction for your donation. If the charity is not registered, there is no tax deduction. Many nonprofits that are registered in the U.S. provide international aid.

5. Is There a Limit on How Much I Can Donate?

There are no limits on charitable contributions for most taxpayers. Most of us will be able to deduct cash contributions in full up to 50% of our adjusted gross income. There are other limitations that come into play should you make significant contributions of property or appreciated capital gains. If you fall into these categories, be sure to consult with your tax adviser to see if your deductions will be limited.

6. How Do I Handle Deductions for Non-Cash Donations to a Charity?

There are rules for non-cash donations such as real property, clothing, or office equipment.

For property owned for more than a year, the deduction is usually equal to the property’s fair market value.

Donated goods must be in “good condition or better,” according to the IRS. You must have a receipt for the goods from the charity to claim a deduction. If you donate non-cash items with a total value of more than $500, you must file IRS Form 8283 with your return.

7. Can I Get a Deduction for Donating My Car?

Making a car donation to a worthy charity seems like a good move, but there is a lot of fraud and misleading information.

To receive a deduction for the donation of a car, truck, boat, airplane or any other vehicle, the item must be worth more than $500, and you must have a written acknowledgement from the charity.

8. Can I Take a Deduction for My Volunteer Work?

No, you can’t deduct the value of your time spent on charitable work as a charitable donation, but you can deduct your out-of-pocket costs such as mileage set at 14 cents per mile. Other possible deductions for expenses include your travel to volunteer abroad or in another state.

9. What Documentation Is Required for Deductions for Charitable Contributions?

To claim a deduction for cash, check, or other monetary gift, you must have a written confirmation from the charity that contains the name of the organization, the date of the contribution and amount of the contribution. Charities are only required to provide written acknowledgement for donations over $250, but most do provide some sort of receipt no matter what size of donation you provide.

For contributions less than $250, if a receipt has not been provided, a cancelled check or a bank record will suffice. You cannot deduct casual donations that you drop into a charity’s collection box or bucket without a receipt.

If you receive some goods or services in exchange for your donation, the charity must specify the value of those goods or services. You can only deduct the amount of your donation that is above that value. The paperwork from the charitable organization should spell out what is deductible.

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Karmen A. Booker is an Attorney, Business Consultant and Owner of Compu-Perfect Professional Services, a business consulting firm specializing in Business Entity Formation (Corporations, Limited Liability Companies, and Nonprofit Corporations), Completing 501(c)(3) Federal Tax Exemption Applications, Grant Research and Writing services, and more.  Call her today at (301) 408-1082.

Attorney Karmen A. Booker has developed an e-book entitled “Fundraising for Nonprofits”, which provides information regarding:

  • Developing a Fundraising Plan
  • Writing a Fundraising Letter
  • Over 16 Specific Fundraising Tips such as selling advertisement space in your newsletter and on your website, and more.

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