IRS Tax Tips for Deducting Gifts to Charity

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A regional arts organization asks for your help with its goal to build a new performance space. Your job issues a challenge for the holidays, and each department is competing to raise the most money for families in need this season. Your best friend is running in a 5K, and she’s looking for sponsors to help her meet her goal of raising money for cancer research and awareness. Here are some IRS Tax Tips to making gift giving easier.  Click here to read or watch more IRS Help resources.

IRS Tax Tips

There are so many great organizations and activities with worthy programs and goals. Though you want to give and help others, you want to do so as wisely and effectively as possible. You want to make it count, and when you do donate, you want to use the IRS Tax Tips and guidelines to ensure your charitable donation is recognized at tax time.

Helpful IRS Tax Tips

IRS Tax Tips 1) “Eligible” or No?:

Not every organization that asks for contributions is considered a “qualified” organization. When you receive a request for a donation, take the time to research the organization or program. The IRS offers an online “Select Check Tool” that lets users search the IRS database to see if an organization is “eligible” for tax-deductible donations. Not all organizations are eligible, and even if a charitable organization has been eligible in the past, if it has failed to stay current with its filings and maintain its tax-deductible status, then it may no longer be eligible.

The IRS Select Check Tool
https://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check

The IRS also notes that you can ask the requesting organization for a letter confirming its tax-deductible status. And if you like to get things by phone, you can always call the IRS at t 1-877-829-5500 to see if the organization is eligible.

Just one asterisk: Not all “eligible” organizations are listed in the IRS database. Some eligible organizations, like churches and “affiliated organizations,” may be eligible but not listed. See more at –

https://www.irs.gov/Charities-&-Non-Profits/Contributors/Other-Eligible-Donees

IRS Tax Tips 2) Just the Two of Us:

In order to claim a tax-deductible donation, the IRS wants to see either 1) a bank record (e.g., a cancelled check, or an account statement), or 2) a letter from the receiving organization acknowledging the donation type, amount, and date. So make sure you save one or both of these acceptable forms of documentation, depending on the donation amount, to make the filing process go smoothly.
Just the three of us? If you are donating through your workplace and a payroll deduction, you should save a pay stub and your W2 wage statement as proof of your donation. Your documents will need to show the total amount withheld (donated), and the IRS will be looking for something called a “Pledge Card” from your chosen charity.

IRS Tax Tips 3) About that Musty Set of Funk & Wagnalls:

Yes, the IRS does care about the condition of the items you donate and claim as tax deductions. In fact, it stipulates that any items donated and claimed on your taxes must be in “good used condition,” or better. But if you’ve decided to donate an original “Turning Leaf” Tiffany lamp, or Babe Ruth’s signature on the last pitched baseball from the 1918 World Series, or any item over $500, you just need to show a “qualified appraisal” of worth when you file.

IRS Tax Tips 4) The Rule of $250:

In order to claim the deduction, every cash or goods donation of $250 or more, you must have a letter of acknowledgement from the receiving and eligible charity. The letter has to be “contemporaneous” and used in addition to other required documentation. If you find yourself giving over $250 to the same organization more than once in a filing year, the IRS will accept separate letters of acknowledgement from the charity for each contribution or an annual summary of all the donations to the same charity. For additional considerations, read more here –

https://www.irs.gov/pub/irs-pdf/p1771.pdf

IRS Tax Tips 5) Quid Pro Quo:

The IRS defines and recognizes quid pro quo: money given to a charity as both a donation and in exchange for goods or services like a ticket or a reception or tour. When you make a quid pro quo contribution, make sure the charity’s disclosure statement accurately reflects the donation, minus the value of the goods or services received. More information on quid pro quo contributions and deductions is available here –

https://www.irs.gov/Charities-&-Non-Profits/Substantiating-Charitable-Contributions

IRS Tax Tips 6) Taking Stock of Donated Stock:

If you’re donating stock or other non-cash contribution like property, use the “fair market value,” or FMV, to determine the value of the donation. Determining the FMV of your stock, property, or other non-cash contribution requires a bit of finesse and a good understanding of the market, so do your research.

The IRS offers more information on FMV with examples at –

https://www.irs.gov/publications/p561/ar02.html

If your non-cash contribution is valued over $500, you’ll need to file Form 8283.

https://www.irs.gov/uac/About-Form-8283

IRS Tax Tips 7) Car Go Bye Bye: The most recognizable non-cash contribution is often sitting in your driveway or garage. A number of charities have set up 1-800 numbers, websites, and well-promoted vehicle donation programs. Though a charity may make the process of vehicle donation appear, do your research before donating. The IRS has a robust and detailed set of specifications about vehicle use, condition, information, transfer, value, appraisal, and deductions. See more at –

https://www.irs.gov/pub/irs-pdf/p4303.pdf

To show donations of airplanes, boats, and motor vehicles use Form 1098-C.

https://www.irs.gov/uac/Form-1098-C,-Contributions-of-Motor-Vehicles,-Boats,-and-Airplanes-1

IRS Tax Tips 8) Not All Good Things Come to Those Who Wait (too long):

Remember that your contribution must be made during the filing year. There is often an end-of-the-year push for donations. If you’re so inclined and want to donate in the same tax year, just make sure your records reflect the date of donation. A check has to be mailed within the year of reporting, and you need your credit card statement to reflect when a charged donation was made, not when you paid off the charge.

IRS Tax Tips 9) So You Know:

Use Schedule A (Form 1040) to show your itemized deductions in the form of charitable gifts. In general, you can deduct up to 50% of your gross (adjustable) income. However, depending on the circumstances, you may be limited to deducting only up to 20% or 30% of your gross adjustable income.

IRS Tax Tips 10) The Five-Star Charity:

The IRS doesn’t require that a charitable organization be the best in its class or the kind that will put your name in a program book and write you a nice “thank you” note in heavy card stock. The IRS only requires that the charity be “eligible” or an accepted non-eligible organization. But for your own peace of mind, you might use the searchable databases of charity watchdogs like Charity Navigator, Give Well, or GuideStar. Often you can discover quite a bit about a charitable organization: from employee salaries, to the mission statement, to overhead costs, to a pie chart that shows how donations are used, and for what.

The desire to give and be part of something greater is an admirable one, and giving wisely only increases your effectiveness. If you know the documentation the IRS requires, you know what records to keep and what records you need from the receiving charity. Finally, if you have an understanding of what the IRS specifies and allows, and what it does not allow, the itemization of your charitable donations can be straightforward and painless. And who knows, you may find that the process of reviewing all your wonderful charitable contributions for the year allows you feel to a sense of pride and experience the joy of giving all over again.

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