Would you like to pay Uncle Sam less while helping out a worthy cause? Then make a donation to a charity before the end of the year. The US Tax code changes every year, but the Internal Revenue Service still lets you deduct donations to charity from the tax you owe...as long as your donation goes to a qualified charity, and you itemize your deductions. The following 8 tips are critical whether you donate cash, property, or even a used vehicle, boat or RV.
1: Make Your Donation by the Numbers... 501 (c)(3). Nobody wants the IRS to disallow a deduction. If you want to avoid having the Internal Revenue Service throw your deduction out, be sure you contribute to a qualified charity. Want a sure bet? Make your donation to a 501(c)(3) organization. If you want to deduct it, donate to a charitable organization - you can't deduct donations to individual people, political parties or organizations or anyone running for office. If you want more information about organizations you can give a tax deductible contribution to, go to the Internal Revenue Service website and download Publication 526.
2: If you want to deduct, you have to itemize. It's that simple. You have to file Form 1040 and itemize your deductions on Schedule A.
3: If you get anything in return, you better put it on your return. If the charity you contribute to gives you anything in return for your contribution, like the free vacation vouchers some charity car donation organizations offer, you need to subtract its value from the amount you donated. The amount left over is the amount you can deduct. This goes for any goods or services you get in exchange for your donation - tickets, vacation vouchers, gift cards or any merchandise. Do the math, it's not worth the risk.
4: How much can you deduct? It depends on what you donate. Stock or other non-cash property can ordinarily be valued at fair market value when you donate it to a charity. Used appliances or clothes should be in good condition if you want to deduct your donation from your tax bill. Do you want to donate a used car, truck or other vehicle? Reputable charities like Volunteers of America (CarsHelpingPeople.org) will give you the paperwork you need to file for your tax deduction.
5: If you know the fair market value of your donation, you probably know how much of a tax deduction you can claim. Fair market value is the term used for the price someone who wants to buy property, a vehicle or an item would pay you for it, if both of you have all of the facts of the property, item or vehicle are known and neither of you have any outside pressure to buy or sell.
6: It won't play without a record. If the charitable contribution you want to deduct from your taxes is cash, check or another kind of monetary gift, you have to have an acceptable record of it. Acceptable records include bank records, payroll deduction records or a written receipt from the charity with the charity's name, along with the date and amount of your contribution. If you make a donation to a charity via a text message, your phone bill can be proof if it shows the name of the charity you contributed to, along with the date and amount.
7: The flip side of records. If you make a contribution of cash or property to a charity that is worth $250 or more, you need the same kind of records outlined above. You will need to show a bank statement or record, payroll deduction slips or a receipt showing how much your monetary contribution was, or describing the property you contributed. The records will also need to disclose whether the charity gave you any goods or services in exchange for your contribution. In many cases the same documentation can outline the written description of monetary gifts and the required acknowledgement for gifts of $250 or more. If your total non cash deduction is over $500 for the year you need to fill out IRS Form 8283 and attach it to your return.
8. A final note for those with extreme generosity. If you contribute property or items with a value of $5000 or higher you will need to complete Section B of Form 8283. Completing Section B usually means you have to get a professional appraisal.
1: Make Your Donation by the Numbers... 501 (c)(3). Nobody wants the IRS to disallow a deduction. If you want to avoid having the Internal Revenue Service throw your deduction out, be sure you contribute to a qualified charity. Want a sure bet? Make your donation to a 501(c)(3) organization. If you want to deduct it, donate to a charitable organization - you can't deduct donations to individual people, political parties or organizations or anyone running for office. If you want more information about organizations you can give a tax deductible contribution to, go to the Internal Revenue Service website and download Publication 526.
2: If you want to deduct, you have to itemize. It's that simple. You have to file Form 1040 and itemize your deductions on Schedule A.
3: If you get anything in return, you better put it on your return. If the charity you contribute to gives you anything in return for your contribution, like the free vacation vouchers some charity car donation organizations offer, you need to subtract its value from the amount you donated. The amount left over is the amount you can deduct. This goes for any goods or services you get in exchange for your donation - tickets, vacation vouchers, gift cards or any merchandise. Do the math, it's not worth the risk.
4: How much can you deduct? It depends on what you donate. Stock or other non-cash property can ordinarily be valued at fair market value when you donate it to a charity. Used appliances or clothes should be in good condition if you want to deduct your donation from your tax bill. Do you want to donate a used car, truck or other vehicle? Reputable charities like Volunteers of America (CarsHelpingPeople.org) will give you the paperwork you need to file for your tax deduction.
5: If you know the fair market value of your donation, you probably know how much of a tax deduction you can claim. Fair market value is the term used for the price someone who wants to buy property, a vehicle or an item would pay you for it, if both of you have all of the facts of the property, item or vehicle are known and neither of you have any outside pressure to buy or sell.
6: It won't play without a record. If the charitable contribution you want to deduct from your taxes is cash, check or another kind of monetary gift, you have to have an acceptable record of it. Acceptable records include bank records, payroll deduction records or a written receipt from the charity with the charity's name, along with the date and amount of your contribution. If you make a donation to a charity via a text message, your phone bill can be proof if it shows the name of the charity you contributed to, along with the date and amount.
7: The flip side of records. If you make a contribution of cash or property to a charity that is worth $250 or more, you need the same kind of records outlined above. You will need to show a bank statement or record, payroll deduction slips or a receipt showing how much your monetary contribution was, or describing the property you contributed. The records will also need to disclose whether the charity gave you any goods or services in exchange for your contribution. In many cases the same documentation can outline the written description of monetary gifts and the required acknowledgement for gifts of $250 or more. If your total non cash deduction is over $500 for the year you need to fill out IRS Form 8283 and attach it to your return.
8. A final note for those with extreme generosity. If you contribute property or items with a value of $5000 or higher you will need to complete Section B of Form 8283. Completing Section B usually means you have to get a professional appraisal.
About the Author:
Cutting your taxes never felt better.Donate a car to Volunteers of America. You get the maximum tax deduction and help us run community services that aid 2 million people nationwide. 88% of all donations are used for community services that bring hope to kids, homeless veterans and forgotten seniors. Visit CarsHelpingPeople.org to see what we're doing near you, then say I want to donate a car