Would you like to pay Uncle Sam less while helping out a worthy cause? Then make a donation to a charity before the end of the year. The US Tax code changes every year, but the Internal Revenue Service still lets you deduct donations to charity from the tax you owe…as long as your donation goes to a qualified charity, and you itemize your deductions. The following 8 tips are critical whether you donate cash, property, or even a used vehicle, boat or RV.
1: Make sure you see the 501 (c)(3). If you don’t want the IRS to disallow your deduction, make sure you make your contribution to a qualified charity. The safest bet is to make your donation to a 501 ( c )(3) organization. It has to be a charitable organization – you can’t deduct contributions to individuals, political organizations or people running for office. If you want more information about finding the right organization to give a tax deductible contribution to, go to the IRS website and download Publication 526.
2: If you want to deduct, you have to itemize. It’s that simple. You have to file Form 1040 and itemize your deductions on Schedule A.
3: If you get anything in return, you better put it on your return. If the charity you contribute to gives you anything in return for your contribution, like the free vacation vouchers some charity car donation organizations offer, you need to subtract its value from the amount you donated. The amount left over is the amount you can deduct. This goes for any goods or services you get in exchange for your donation – tickets, vacation vouchers, gift cards or any merchandise. Do the math, it’s not worth the risk.
4: Specific types of donations have specific types of deductions. You can usually value stock or other non-cash property at fair market value. Used household items or clothes usually have to be in pretty good condition if you want to deduct their value. If you’re donating a used vehicle like a car or truck to charity, reputable charities like Volunteers of America (CarsHelpingPeople.org) will provide you with the proper paperwork for your tax deduction.
5: Get to know the fair market value. Most of the time fair market value is the amount that someone who wants to buy property, a vehicle or an item would pay someone who is selling it, when both of them have no pressure to buy or sell and all of the facts of the property, item or vehicle are known.
6: If you don’t have a record, the IRS won’t play. If the contribution you want to write off is cash, a check or another kind of monetary gift, the IRS requires you to have to have an acceptable record of it. Acceptable records include payroll deduction records, bank records or a written receipt from the charity that includes the name of the charity, the date of your contribution and the amount you donated. If you make a donation to a charity via a text message, you can use your phone bill as proof – if your phone bill shows the name of the charity you contributed to, along with the date and amount of your donation.
7: The flip side of records. If you make a contribution of cash or property to a charity that is worth $250 or more, you need the same kind of records outlined above. You will need to show a bank statement or record, payroll deduction slips or a receipt showing how much your monetary contribution was, or describing the property you contributed. The records will also need to disclose whether the charity gave you any goods or services in exchange for your contribution. In many cases the same documentation can outline the written description of monetary gifts and the required acknowledgement for gifts of $250 or more. If your total non cash deduction is over $500 for the year you need to fill out IRS Form 8283 and attach it to your return.
8. Feeling extra generous? This note is for you. If you donate items or property valued at $5000 or more you have to complete Section B of Form 8283. To do that usually requires a professional appraisal.
Saving on taxes feels great.Donate a car to Volunteers of America. You get a significant tax deduction and help fund community programs that aid 2 million people nationwide. 100% of all donations stay with VOA to bring hope to kids, homeless veterans and forgotten seniors. Go to CarsHelpingPeople.org or call 877-721-4862, and say I want to donate a car