Immediately following the account-draining “Black Friday” and “Cyber Monday” shopping sprees, #GivingTuesday kicks off the charitable season as many begin focusing their wallets on year-end holiday giving. And as tax filing season approaches soon after, Truax would like to remind everyone that giving money or goods to a qualified charity by Dec. 31st may offer substantial deductions on your 2016 federal income tax return!
Just remember, only donations to eligible organizations are tax-deductible. Churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations even if they are not listed in this database.
Claiming Charitable Donations
Only taxpayers who itemize using Form 1040 Schedule A can claim deductions for charitable contributions. Charitable deductions are not available to individuals who choose the standard deduction or file Form 1040A or 1040EZ. Your tax preparer can provide additional information about available tax savings if itemized deductions, such as mortgage interest, charitable contributions, state and local taxes, exceed the standard deduction.
A bank record or a written statement from the charity is needed to prove the amount of any monetary donation. Bank records include canceled checks, and bank, credit union and credit card statements. Donations of money include 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 furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
For donations of clothing and other household items the deduction amount is normally limited to the item’s fair market value. Household items include furniture, furnishings, electronics, appliances and linens. Clothing and household items must be in good or better condition to be tax-deductible. A clothing or household item for which a taxpayer claims a deduction of over $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. It must include, among other things, a description of the items contributed. Special rules apply to cars, boats and other types of property donations.
Benefit in Return.
Donors who get something in return for their donation may have to reduce their deduction. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.
Older IRA Owners Have a Different Way to Give
IRA owners, age 70½ or older, can transfer up to $100,000 per year to an eligible charity, tax-free. Funds must be transferred directly by the IRA trustee to the eligible charity. See Publication 590-B for additional details.
To find out if your donation is tax deductible, visit Can I Deduct My Charitable Contributions? on the IRS.gov website or contact one of our qualified tax professionals today for assistance.