To be deductible, charitable contributions must be made to qualified organizations. How do you determine whether the organization qualifies for income tax deduction purposes? Refer to the IRS search tool titled Tax Exempt Organization. See Publication 326, Charitable Contributions, and the “Can I Deduct My Charitable Contributions?” tool.
If you receive merchandise, goods or services — let’s say admission to a charity ball, banquet, theater or sporting event — you can deduct only the amount that exceeds the fair market value of the item or service received.
For contributions of cash, check or other monetary gift, you must maintain a record of the contribution. When donating, keep this in mind:
- Retain a bank record or written communication from the organization with its name, the amount and the date.
- The fair market value of any property you donate, which you’ll find by checking out Publication 561, Determining the Value of Donated Property, must be a factor in how you proceed.
- For contributions of $250 or more — cash or property — obtain and keep in your records a contemporaneous written acknowledgement indicating the amount and description of property contributed.
- The acknowledgement should include whether the organization provided any goods or services in exchange for the gift.
- It also should provide a description and a good-faith estimate of the value of the goods or services.
- The same document can satisfy both communication requirements.
Fill out Form 8283, Noncash Charitable Contributions, and attach it to your return if your deduction for a noncash contribution is more than $500. If you claim a deduction for a contribution of noncash property worth up to $5,000 but more than $500, fill out Section A of Form 8283. If it’s worth more than $5,000, you’ll need a qualified appraisal of said property and a filled-out Section B of Form 8283; include the appraisal with your return.
Special rules apply to donations of certain types of property, including autos, inventory and investments that have appreciated in value. For more information, refer to Publication 526, Charitable Contributions. If you desire more information on determining the value of your noncash contributions, refer to Publication 561, Determining the Value of Donated Property. Also note that this is just a summary–there may be other rules and exceptions governing your donation, so consult a qualified professional.
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