The tax code can be confusing—especially when it comes to what can and cannot be deducted. The IRS offers the following tips to help make the most of your charitable contributions when filing your tax return.
What Doesn’t Qualify
You can’t deduct contributions to specific individuals, political candidates or organizations. To be qualify for a tax break, contributions must be to an organization that the IRS considers a qualified entity.
Keep Paperwork
When deducting a charitable contribution, make sure you have the proper documents. You need to file Form 1040 and itemized deductions on Schedule A. To claim a deduction for cash contributions or property valued at $250 or more, you must have documentation such as a bank record, payroll deduction or a written acknowledgement from the organization with the amount of cash donated, a description of any property donated and whether the organization provided any goods or services in return for the contribution.
How to Subtract What Doesn’t Qualify
If you receive any benefits as a result of your charitable contribution, (such as merchandise or tickets to an event), you can only deduct the amount that exceeds the fair market value of the benefit you received.
Putting a Price on Non-Cash Donations
If you donate stock or other non-cash property the IRS tends to value it at fair market value. To be eligible for a deduction, clothing and household items must typically be in good condition, and special rules apply for donating a vehicle.
Fill Out the Right Form
If your total noncash contributions for the year is more than $500, you must fill out IRS Form 8283 Noncash Charitable Contributions. You must have written documentation showing the name of the organization, date of the contribution and the amount given.
Taxpayers donating an item or group of similar items valued at more than $5,000 must fill out Section B of Form 8283, which usually requires an appraisal. (Reuters)