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Tax Deductible Charitable Donations/Contributions

TaxBizPro, LLC Posted on: August 24, 2009 14:05

Here are some important facts you need to know before deducting charitable donations/contributions. Note that in order to deduct charitable contribution you need to itemized your deductions on Schedule A of form 1040

Charitable contributions must be made to a qualified charitable organization.  Qualified means that the charity is registered with the IRS and has received a status of qualified organization.  The most common qualified organizations are: non-profits also knows as 501 (c) (3) organization, public charities, religious organizations, (churches, synagogues, etc), schools and etc. You can deduct up to 50% of your AGI (Adjusted Gross Income) and if your charitable donations are in excess of 50%, you may carry it forward to the next year.
You generally can deduct your cash contributions and the fair market value of the property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet, raffle tickets or other event, you can deduct only the amount that exceeds the fair market value of the benefit received.
Be sure to keep good records of any charitable contribution you make, regardless of the amount.  For any contribution made in cash, you must maintain a record of the contribution such as a bank record like a cleared check or a credit card statement.  For any single contribution of $250 or more, you must have written receipt from the organization in additionto the bank record as explained above.  This written receipt must include: the amount of contribution, description of the contribution and/or market value of the property you donated.  The charitable organization must indicate on the receipt weather any goods or services were provided in exchange.
Only contributions actually made during the tax year are tax deductible.  So if you pledged $500 to a charity in September of this year, but so far this year you paid to the charity only $200, only that $200 you have contributed will be tax deductible on your tax return for this year.
The charitable contribution is realized when you mail a check or charge the credit card.  If you mailed a check on December 31, but the charity doesn’t cash the check until February of next year you are still eligible to deduct the December’s contribution this year even though the charity cashes your check next year.  Include donations with a credit card even though you may not pay the credit card bill until the next year.
Special rules apply to donating a property or items valued at $500 or more.  You must complete additional form for non-cash charitable contributions, and attach it to your tax return.  An appraisal generally must be obtained if you claim a tax deduction for a contribution of non-cash property worth more than $5,000.

For more information see IRS Publication 526Publication 561Form 8283

Posted in:Personal Tax ArticlesThis article was written by TaxBizPro, LLC 2023, all rights reserved ©.  

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