How to Claim a Deduction for Charitable Contributions
You can claim a deduction for charitable giving on Schedule A. You’ll add up your contributions plus any other itemized deductions, then enter the total on Form 1040. You can’t itemize and claim the standard deduction at the same time. The schedule isn’t just for claiming charitable donations. It includes and calculates all itemized deductions you’re eligible for. Other possible itemized deductions include things like medical and dental expenses you paid for yourself or for your dependents over the course of the year, including insurance premiums. They also include state and local taxes you might have paid and home mortgage interest.
Rules for Claiming the Charitable Contribution Tax Deduction
The IRS imposes several rules for claiming a tax deduction for charitable contributions.
You Must Actually Donate Cash or Property
A pledge or promise to donate is not deductible unless and until you actually do so.
You Must Contribute to a Qualified Tax-Exempt Organization
Charities will let you know if they have 501(c)(3) tax-exempt status, but some organizations, including churches and other religious organizations, are not required to obtain 501(c)(3) status from the IRS. They count as qualified charities regardless, as do certain trusts and non-profit volunteer fire companies.
You Must Meet Several Record-Keeping Requirements
Hold on to paperwork that proves your contributions. Save canceled checks, acknowledgment letters from charities, and, if possible, appraisals that confirm the value of donated property.
Keeping Records of Your Donation
Your written records must indicate the name of the charitable organization, the date of your contribution, and the amount that you gave. Canceled checks work well, because the name of the charity, the date, and the amount of the gift appear there. Bank statements are good, too, when they show a gift paid by debit card—credit card statements work when they show this same information. Charitable organizations will often provide you with written letters of acknowledgment or receipts. The IRS may not let you claim charitable donations of $250 or more if you don’t have a written acknowledgment from the charity to document your donation, in addition to your other records.
Tips for Donating Non-Cash Contributions
You must be able to substantiate the fair market value of goods or property you donate, including vehicles, boats, or even planes. Also, you’ll need a written acknowledgment from the charity for this type of donation. You must fill out Form 8283 and include it with your tax return if the property is worth more than $500. Here are a few tips and things to keep in mind when donating non-cash items:
Make a List Describing the Items You’re Going To Give Away
You’ll need these details for Form 8283. Keep this list until after you file your taxes.
Note the Condition of Each Item, and Arrive at a Value
The IRS will allow a deduction for any item that’s in “good working condition or better.” In other words, don’t bother to claim a deduction for that old TV in your basement that hasn’t worked in years, even if it just needs a single new part. At the very least, you must have it valued in its current condition without the new part. Save the price tag and the store receipt to prove the item’s value if it’s brand new.
Consider Taking Pictures of Your Donations
Having a picture of what you donated can be useful, especially if you’re donating a lot of items. It isn’t technically a requirement, but it can’t hurt in the event that your return is audited. Just snap away on your phone, then save them in an easy-to-access location.
Prepare Your Own Receipt To Prove the Tax-Deductible Donation
If you write it yourself ahead of time, you can simply have the receipt signed when you drop off your items. This way, you can rest assured that the receipt is correct and that it includes all the information you need.
Obtain a Written Appraisal if You’re Donating Property Worth More Than $5,000
You must complete Section B of Form 8283 and get a qualified appraisal of a donation valued at more than $5,000.
Limits on the Charitable Contribution Tax Deduction
Generally, you can deduct contributions up to 60% of your adjusted gross income (AGI), depending on the nature and tax-exempt status of the charity to which you’re giving. You can deduct contributions of appreciated assets up to 20% of your AGI. For example, if your AGI is $50,000, then the maximum deduction you can typically take for charitable donations is $30,000. Generally speaking, you can carry the excess over to subsequent tax years if your gifts exceed these thresholds. Excess contributions can be carried over for a maximum of five years.
What Charitable Donations Are Not Deductible?
Some contributions aren’t tax-deductible, including:
Gifts made to political parties, political campaigns, or political action committeesMoney spent on bingo games or lottery-style drawingsContributions to for-profit schoolsContributions to foreign governments
That still allows for a lot of charitable giving to whittle away at your tax liability, if you choose to itemize.
