Tips on deducting charitable contributions
Donating to charity makes you feel good and can help lower your tax bill. Here are some tips to help ensure your contributions pay off on your tax return.
1. You must donate to a qualified charitable organization. You can’t deduct contributions you make to an individual, a political organization, or a political candidate.
2. You have to file Form 1040 and itemize your deductions on Schedule A.
3. If you receive a benefit of some kind in return for your contribution, you can only deduct the amount that exceeds the fair market value of the benefit you received. Examples of benefits you may receive in return for your contribution include merchandise, tickets to an event, a dinner, or other goods and services.
4. You can deduct your mileage (at 14 cents a mile) and other out-of-pocket expenses you incur in charitable activity.
5. But you CANNOT deduct the value of your donated time.
6. Donations of stock or other non-cash property are usually valued at their fair market value, which is the price you would get if you sold the item on the open market. For household items and clothing (which must be in good condition to be deductible), think of what they would fetch at a garage sale. If your total deduction for all non-cash contributions for the year is more than $500, you must also file Form 8283, Noncash Charitable Contributions, with your tax return. Special rules apply to vehicle donations.
7. You must have a written record of your donation in order to deduct any cash gift, regardless of the amount. Cash contributions include those made by check or other monetary methods. That written record can be a written statement from the organization, a bank record or a payroll deduction record that substantiates your donation. That documentation should include the name of the organization, the date and amount of the contribution.
8. To claim a deduction for gifts of cash or property worth $250 or more, you must have a written statement from the qualified organization. The statement must show the amount of the cash or a description of any property given. It must also state whether the organization provided any goods or services in exchange for the gift.
9. If you donate one item or a group of similar items that are valued at more than $5,000, you must also complete Section B of Form 8283. This section generally requires an appraisal by a qualified appraiser.
Bonus tip: Report only those contributions you actually made in 2014. If you pledged $100 to an organization in December, but didn’t actually pay until January, your deduction will be for 2015, not 2014. However, if you paid by credit card in December but didn’t actually pay your credit card bill until January, you can still deduct the $100 for 2014. Same goes for a check mailed in December that didn’t clear your bank until January: you can deduct it for 2014.
For more information on charitable contributions, see Publication 526, Charitable Contributions, available at www.irs.gov. For information about noncash contributions, see Publication 561, Determining the Value of Donated Property.
A CPA told me, “Your explanation of the charitable gifts [in The Actor’s Tax Guide] is probably the clearest, most concise explanation I have ever read.” Get the book at www.ActorsTaxGuide.com.