Tax Tips for Deduction of Charitable Giving
Posted by Davis & Hodgdon Associate CPAs, November 7, 2017.
'Tis the season for giving thanks! The holidays are upon us prompting many to consider charitable giving. Before moving forward review these tax deduction tips from the IRS. If you are going to give you should reap the benefits of saving tax dollars!
If taxpayers gave money or goods to a charity in 2017, they may be able to claim a deduction on their federal tax return. Taxpayers can use the Interactive Tax Assistant tool, Can I Deduct my Charitable Contributions?, to help determine if their charitable contributions are deductible.
Here are some important facts about charitable donations:
1. 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.
2. Itemize Deductions. To deduct charitable contributions, taxpayers must file Form 1040 and
itemize deductions. File Schedule A, Itemized Deductions, with a federal tax return.
3. 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.
4. 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. Special rules apply to cars,
boats and other types of property donations.
5. Noncash Charitable Contributions. File Form 8283, Noncash Charitable Contributions, for
all noncash gifts totaling more than $500 for the year. Complete section-A for noncash
property contributions worth $5,000 or less. Complete section-B for noncash property
contributions more than $5,000 and include a qualified appraisal to the return. Taxpayers may
be able to prepare and e-file their tax return for free using IRS Free File. The type of records
they must keep depends on the amount and type of their donation. To learn more about what
records to keep, see Publication 526, Charitable Contributions.
6. Donations of $250 or More. If taxpayers donated cash or goods of $250 or more, they
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 they received any goods or
services in exchange for the gift.
With offices in Williston and Rutland Vermont, Copper Leaf Financial is a Registered Investment Advisor (RIA) dedicated to holistic, transparent, evidence-based advice. We are a fiduciary, fee-only firm serving clients with objectivity and integrity on all financial planning areas including charitable giving for more than 25 years. Call us today at (802) 878-2731 to schedule a strategy session and begin building your road map to financial success.