If you make donations to charity, you are going to want to read what the IRS says about this. In order to have the best chance of getting your charitable donation deducted from your tax liability, you must do the following. Click here to read or watch more IRS Help resources.
1. Confirm Tax-exempt Status
Be sure to confirm that the charity you contribute to has a valid tax-exempt status. This can be done through a search tool on the IRS website, www.irs.gov in the Exempt Organizations Select Check. This tool also helps you to check information about tax forms the organization may file that are available for public review and find a list of charities that have had their tax-exempt status revoked.
2. Use Form 1040 Schedule A
Your charitable donations will only be deductible if you itemize them using Form 1030 Schedule A so please ensure you list your charitable donations in your tax returns using this form following the proper procedure.
3. Calculate the amount to be deducted
Generally, the amount of cash you contribute would be deducted from your taxes. If you contributed a gift in kind, the market value of this gift would be taken as the amount to be deducted. But if you received something in return for your donation like a ticket to a dinner or a service or goods of some sort, you must deduct the value of what you receive from the amount of donation you make. Only the amount that exceeds the value of what you received will be deductible.
4. Validate your donations with documentary proof
The IRS would want to see documentary proof of your donation in the form of official receipts, bank or credit card statements or a letter from the charity organization that gives details of the charity’s name, contribution date and amount. So you must keep these types of documents for the IRS to view.
5. Fulfill additional requirements for large donations
If your donation comes up to $250 or more, there are some specific requirements laid down by the IRS that you need to fulfill. You must provide a written statement from the charity organization confirming the amount of your donation and/or provide a description and fair market value of the gift you donated. The statement must also confirm whether you received any goods or services in exchange for your donation.
If your non-cash gift is valued at $500 or more, you must also fill up Form 8283, Noncash Charitable Contributions, and submit it with your return. If your non-cash gift is worth more than $5,000, you need to have your gift properly valued and attach the valuation with your tax return along with Form 8283.
6. Make your deduction in the same tax year
IRS rules state that you can only claim a deduction of your charitable donation in the tax year that you made it. This means if you pledged a donation but have not fulfilled your pledge in full, you may not deduct your donation. You may however, deduct any portion of the pledged donation you actually gave in that tax year. Suppose you pledged a $300 donation in 2011 but gave only $100 by the tax deadline, then you may only deduct $100 not $300.
If you follow these simple guidelines, you will have no problem deducting your charitable donations from your taxes.