If you gave money or goods to a charity, you may be able to claim a deduction on your federal tax return. Here are some important facts about charitable donations: Qualified Charities. Taxpayers must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible. To check the status of a charity, use the IRS Select Check tool. Itemize Deductions. To deduct charitable contributions, taxpayers must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with a federal tax return. Your intent here is to use the charitable, tax, mortgage interest and miscellaneous individual deductions and beat the Standard Deduction the IRS allows, which is $12,600 for married filing jointly and $6,300 for individuals. Benefit in Return. If taxpayers get something in return for their donation, they may have to reduce their deduction.
Taxpayers can only deduct the amount that exceeds the fair market value of the benefit received. Examples of benefits include merchandise, meals, tickets to events or other goods and services. So, if you attend a charitable event and bid $300 on an auction item worth $100, your deduction for charitable purposes would only be $200. Type of Donation. If taxpayers give property instead of cash, their deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price they would get if the property sold on the open market. If they donate used clothing and household items, those items generally must be in good condition or better. The Salvation Army and other organizations provide guidelines on valuing these items. It is wise to keep a record of the items donated and picture to support the deduction is always helpful.
Special rules apply to cars, boats and other types of property donations. Noncash Charitable Contributions. For all noncash gifts totaling more than $500 for the year you must file an additional form, 8283 and provide extra information about the donation. Donations of cars require that you receive a form 1098-C from the charity. Noncash property contributions of more than $5,000 must include a qualified appraisal with the return. The type of records you must keep depends on the amount and type of your donation. To learn more about what records to keep, see Publication 526, Charitable Contributions. It is always prudent to request an acknowledgement letter from the charity, regardless of the amount donated.
If you donated cash or goods of $250 or more, you must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether you received any goods or services in exchange for the gift. Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return Anita Jean is an Enrolled Agent and owns Financial Fitness Tax Service at 5099 US Hwy 377 in Krugerville, TX. You can reach her at 940.365.3115 or at firstname.lastname@example.org.