Tax Deductions

November 7, 2014

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.


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.

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Are Contributions Deductible?

March 5, 2014

If your charity does not have 501(c)(3) status, you should inform donors that their contributions are not tax-deductible. Be aware that some potential donors may not be comfortable giving money to an organization that is not officially exempt.

If your 501(c)(3) status is pending, you should also inform donors of its pending status. Once you receive your exempt status, donations received while your application was pending may be treated as tax-deductible contributions retroactive to the date of your organization’s formation. However, if your application is not approved, contributions will not be considered tax-deductible for donors.


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.

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What are Limits on Nonprofit Activities?

December 8, 2012

In addition to keeping corporate records, nonprofit corporations must follow some additional rules and abide by certain prohibitions in order to retain their tax-exempt status:

*  Nonprofit corporations cannot contribute money to political campaigns or participate in political campaigns. If they do, the IRS can revoke their nonprofit status, and can assess a special excise tax against the organization and its managers.

*  Nonprofit corporations can engage in only limited lobbying activities. Tax-exempt 501(c)(3) nonprofits that influence legislation to any “substantial degree” face the loss of their nonprofit status. However, for tax-exempt nonprofits that want to participate in lobbying, the IRS simply sets a limit on the money they can spend on political activities.

*  Nonprofit corporations must not distribute profits to members, officers, or directors. A nonprofit corporation cannot be organized to financially benefit its members, officers, or directors. However, reasonable salaries and expense reimbursements are permitted.

*  Nonprofit corporations must pay taxes on income from “unrelated activities.” Sometimes, a nonprofit organization will earn income through activities that aren’t directly related to its nonprofit purpose; for example, the directors of an organization dedicated to preserving open space may collect a consulting fee for advising other nonprofits. The IRS requires nonprofits to pay corporate income taxes on such unrelated income over $1,000, whether or not the group uses that money to fund its tax-exempt activities.

* Nonprofit corporations cannot make substantial profits from unrelated activities. If a nonprofit spends too much time on unrelated activities, or if the unrelated activities generate “substantial” income, the group’s nonprofit status may be jeopardized. Nonprofit corporations that plan to engage in activities that aren’t related to their tax-exempt purpose should consult a lawyer or tax expert with experience in nonprofit law.

*  When a nonprofit corporation dissolves, its assets must be distributed to another tax-exempt group. Since tax-exempt organizations and their assets cannot be owned, they can never be sold. If the directors of a nonprofit decide to disband the organization, they must donate its assets to another nonprofit group. This also means that once property goes into a nonprofit corporation, it cannot later be distributed to a member or director.