Advice on Claiming Charitable Deductions
Charitable donations are sometimes deductible from your taxable income. The Internal Revenue Service enforces strict rules concerning charitable deductions, however, and under certain circumstances they are complicated. Ideally, donating to a charity can lower your tax rate by kicking you into a lower tax bracket. In this way, a charitable deduction might save you more in taxes than the amount you donated.
Give Only to Qualified Organizations
You can't write off the value of a donation unless the organization is qualified under Section 501(c)(3) of the Internal Revenue Code. Most non-profit hospitals, schools, public charities and churches qualify, and they should be able to show you a copy of the IRS approval letter before you make the donation. Although churches can deduct donations without receiving approval from the IRS, many of them have sought and received approval anyway. Churches still are subject to certain qualification rules, which means you could lose your deduction if the IRS determines it doesn't qualify as a "church" for tax purposes.
Get Expensive Property Appraised
Donations of property must be properly valued before you an deduct them. If the total value of all your non-cash contributions during a tax year exceeds $500, you must file Form 8283. The IRS will not accept an appraisal issued by anyone affiliated with the organization to which you donated.
Keep Accurate Records
When you donate $250 or more to an organization during the tax year, the organization is required to provide you with a written acknowledgement that includes basic information such as the nature of the gift, its value and the date the donation was made. This requirement applies not only when you donate a single gift worth $250 or more, but also when the aggregate value of all gifts you make to a particular organization during the tax year reaches $250. Although you don't need to file the acknowledgement with your tax return, you may need it if the IRS audits you. You also should keep your own records of smaller gifts.
File the Right Forms
You must itemize your deductions to take a 501(c)(3) deduction. You itemize on Schedule A and report the value of your deduction on Form 1040. You can't take the standard deduction if you itemize. If you donate items other than cash that are worth more than $500, you also must file Form 8283. If the value of your donation exceeds $5,000, you must use a qualified appraiser and complete Schedule B of Form 8283. If the value of your non-cash donation exceeds $500,000, you must file a copy of the appraisal report with Form 8283.
- Internal Revenue Service: Eight Tips for Deducting Charitable Contributions
- Internal Revenue Service: Topic 506 -- Charitable Contributions
- Internal Revenue Service: Publication 526 -- Charitable Contributions
- Bankrate.com: Gifts to Charity Pay Off on Your Taxes
- Internal Revenue Service: Tax Guide for Churches and Religious Organizations
David Carnes has been a full-time writer since 1998 and has published two full-length novels. He spends much of his time in various Asian countries and is fluent in Mandarin Chinese. He earned a Juris Doctorate from the University of Kentucky College of Law.