Thursday, July 11, 2013

Charity Begins at Home Part 2


What factors determine if your donation is tax deductible or not:  For a charitable donation to be tax deductible, one has to keep in mind first and foremost that one has to itemize deductions on the tax return via Schedule A and,
  • That the donation is to a qualified organization. A qualified organization is an
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organization to whom one can  make tax deductible donations. Usually, this is an organization registered under Section 501(c)(3) or 501(c)(19). 
  • These organizations include non-profit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to animals or children. (For an exhaustive list refer Pub 526)
  • One can check for an organization's status with the Internal Revenue Service on this website. If there is ever a doubt in your mind as to whether an organization's tax exempt status is true, whether you want a tax deduction or not, this website would be a good starting point. 
  • You can also check with the Better Business Bureau for their accredited charities.
  • If you received a gift or any other benefit in exchange for your donation, it is deductible only to the extent it's value exceeds that of the gift/ benefit received. 
  • If you make contributions to needy individuals, your donation is NOT tax deductible. 
    Pic Courtesy: Google Images
  • The VALUE of your volunteer time is NOT deductible, however out-of-pocket expenses directly related to such volunteer work & miles driven to & from volunteering is tax deductible.

  • Donated goods may be deducted at their fair market value at the time of
    contribution. There is a general guide on valuing used clothing & other household items at this website. I would like to point out here that it is VERY important to keep either pictures or a list of items donated. This is increasingly becoming an audited area by the IRS and some claims are being denied if deemed exorbitant. The rules for donating cars and other vehicles are different. When donating goods Form 8283 has to be used to provide details & attached to Schedule A.  
  • In addition to the above if your cash donations exceed $250, you require a written acknowledgement from the charity. Bank records and written communication from the charity are also acceptable forms of records for donations less than $250. 
Please be sure to contact a tax professional if you need help with the above. 
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As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website, www.mntaxsolutionsllc.com.