Charitable Donation Tax Deduction
Lower your taxes with the charitable donation tax deduction. By donating to charity this tax deduction is a win-win for the charity you are donating and to YOU!
Are all contributions deductible?
Read on to find out to whom you can donate, what can be donated,how much can you deduct, and how to keep records for the charitable donation tax deduction.
Whom can you donate to?
Only donations made to a qualified organization are deductible.(Sorry, donations given to individuals are not deductible.) The organization (unless it is a church or government) must apply to the IRS to be qualified.
Not all organizations can apply, they must belong to certain categories to be eligible.
Here's a list of organizations that can qualify.
- Medical research
- Preventing cruelty to children or animals
- War veterans
- Volunteer firefighters
- Civil defense
- Certain nonprofit cemeteries
- Governments in the US or its territories for example federal, state, or indian tribal. Only donations that are for helping the public
The U.S. has treaties with Canada, Mexico, and Israel which allow deductions for donations to charity organizations in those countries.
Generally, to be eligible for the deduction you must have income from the country (Canada, Israel, or Mexico) the charity is from. There are different rules for each country about the amount you can deduct and which charity is eligible.
Unsure if the charity you want to donate to is eligible to receive tax-deductible charitable donations?
for accurate up-to-date information.
What can you deduct?
The most common charitable donation tax deductions are money and property.
Money includes cash, check, money order, or credit card contributions.
Property You can generally deduct the fair market value (which is usually much less than if the item was new) of the item as a charitable donation tax deduction.
How Much Are Your Donated Items Really Worth?
Some guidelines on donated property:
- Clothing and household items like furniture, electronics, appliances, and linen - must be in good used condition or better. If you send along with your tax return a qualified appraisal of over $500- for an item, you can deduct it regardless of condition.
- Cars, boats, and airplanes - You can deduct the lesser of:
-The amount the organization was able to sell it for.
-The Fair Market Value
If the deduction is more than $500- the organization must give you form 1098-C (or equivalent) to attach to your tax return.
- Capital Assets like stocks, bonds, jewelry, coins, that are held for investment and Real Property which is land and everything built onto it have different rules.
In most cases you can deduct the fair market value of the donation even if the value is more than the original cost was but you are more limited as to how much you can deduct as you will see below.
You can also deduct out-of-pocket expenses
that you incurred when you volunteered services to qualified organizations but not the value of the work you did as a volunteer.
How much can be deducted?
You can deduct charitable contributions you gave valued at least twenty percent of your adjusted gross income.
If you donated more and want to increase your charitable donation tax deduction you have to ask the organizations you donated to if they are a 50% limit organization.
Most organizations fall into this category except for veterans’ organizations, fraternal societies, nonprofit cemeteries, and some private foundations.
You can donate to a 50% limit organization up to half of you adjusted gross income and deduct these donations from your tax return.
However if your contribution is from capital assets or real property you will be limited to 30% of you income.
What if the organizations you donated to are not 50% limit organizations, how much can you deduct on your charitable donation tax deduction?
Your limit is lowered to 30% for cash and ordinary property and 20% for capital assets and real property.
Tip: If you use the actual cost instead of the fair market value when calculating the value of capital assets and real property you can raise the limit of your charitable donation tax deduction to the same as the limit for cash and ordinary property. This tip is useful when the property did not increase in value too much.
If you donated more than the limit you will be able to carry it over to the following years' charitable donation tax deduction.
Read Publication 526 for more details on how to apply these limits.
How to keep the records?
If it is a money contribution you need to keep a receipt from the organization stating the amount of the donation and if you received any benefits for it. If the donation is less than $250- a bank record like a cancelled check or a credit card statement with the name of the organization, date, and amount is enough.
A contribution that is deducted from your paycheck, you have to show your pay-stub or W2 form plus the pledge card or document from the organization as proof. If any single payment is more than $250- a clause that you did not get any goods or services must be included on the pledge document.
For donated property you must be able to show:
- Name and address of the organization
- Date and location where the property was donated
- Description of the property
- The fair market value
A letter from the organization should show the first three details. If you left the item at an unattended drop-off place you do not need a letter.
If any single property contribution is valued at $250 or more you must show a receipt which also must state if you received any benefit for the contribution.
For property valued over $500- you must also show records how you got the property (purchase, gift, etc.), the date when you got it, and the original cost of the property.
If a single donated item or a group of similar donated items are valued over $5000- you must include a qualified written appraisal. See Publication 561.
For more information see:
Schedule A Instructions
Updated January 19, 2012
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