Charitable Contributions and Taxes

Charitable Contributions - Donations file folder tab

Charitable Contributions and Taxes. If you give money or goods to a charity, you may be able to claim those as a deduction on your taxes. This will reduce the amount of your taxable income. Here are the rules for charitable contribution deductions:

Your Donation Must Given be to a Qualified Charity

Organizations must be eligible to receive tax-deductible charitable contributions.

The IRS keeps a list of these organizations online.  You can use this list to verify that your donations are going to a qualified organization.

Certain qualified organizations, such as churches, may not be listed in the database. If that is the case, you will need to check the “Other Eligible Donees” page on the IRS site to see if your organization qualifies.

Contributions to individuals are not tax deductible. Neither are donations to political organizations or a political candidate.

You Must have Proof of your Donation for a Deduction

If you have donated $250 or more in goods or cash, you will need a written statement from the charity. It must show:

  • The amount of the donation
  • A description of the property given
  • Whether you received any goods or services in exchange for the donation. (This may reduce your contribution deduction, see next heading)

You can only Deduct Fair Market Value – Less any Benefit you Receive in Return

If you receive something in return for your donation (a “benefit”), its value must be subtracted from your donation.

This happens more often than you might think.

Benefits include meals, tickets, and merchandise – such as admission to a charity ball, tickets to a sporting event, or giveaways. This applies whether you donated cash or property.

For property donations, you can only deduct the fair market value of those items. Fair market value is what you’d get on the open market for those items.  Remember to subtract any benefit you have received.

Any used household or clothing items must be in good (or better) condition to count toward a tax deduction. There are other rules for automobiles, boats, and different types of property donations.

If you donate more than $500 in non-cash charitable contributions, you or your tax preparer must file Form 8283.

Two Tips on Making Charitable Donations

Tip #1- Avoiding Capital Gains Tax

If you own stock or appreciable property (i.e., art) that you want to give to a charitable organization, you may want to consider giving it directly to the organization. That way, you’ll avoid paying capital gains tax on the sale of that property. The organization, meanwhile, can sell the property and not pay the capital gains tax. On the other hand, if you sell the property yourself, then give it to a charitable organization, you’ll pay up to 20% tax on that gain.

Tip #2 – Charitable Donations & Required Minimum Distributions

Please note that if you are 70 ½ or older, there are special charitable donations rules if you take the required minimum distributions. You can donate directly to a charity from your retirement account. This donation will reduce your income on your taxes for the year. There are income limitations. You can do this even if you don’t want to itemize.

Typically, you must itemize to receive a charitable deduction from your taxes.

Be charitable, and get your tax deductions! SFS Tax & Accounting Services is always available to answer all of your tax questions. So give us a call at 772.337.1040 or make an appointment online now.

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Jeffrey Schneider, EA, CTRS, NTPI Fellow, has the knowledge and expertise to help you reach a favorable outcome with the IRS. He is the head honcho at SFS Tax & Accounting Services and the Enrolled Agent and Certified Tax Resolution Specialist for The Tax Relief Company.

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For more on SFS Tax & Accounting Services, visit https://sfstaxacct.com/

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738 Colorado Avenue Stuart, FL 34994

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Phone: 772-337-1040

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