Charitable Donations

If taxpayers gave money or goods to a charity in 2016, they may be able to claim a deduction on their federal tax return. Taxpayers can use the Interactive Tax Assistant tool, Can I Deduct my Charitable Contributions?, to help determine if their charitable contributions are deductible.

Here are some important facts about charitable donations:

Qualified Charities. Taxpayers must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible. To check the status of a charity, use the IRS Select Check tool.

Itemize Deductions. To deduct charitable contributions, taxpayers must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with a federal tax return.

Benefit in Return. If taxpayers get something in return for their donation, they may have to reduce their deduction. Taxpayers can only deduct the amount that exceeds the fair market value of the benefit received. Examples of benefits include merchandise, meals, tickets to events or other goods and services.

Type of Donation. If taxpayers give property instead of cash, their deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price they would get if the property sold on the open market. If they donate used clothing and household items, those items generally must be in good condition or better. Special rules apply to cars, boats and other types of property donations.

Noncash Charitable Contributions. File Form 8283, Noncash Charitable Contributions, for all noncash gifts totaling more than $500 for the year. Complete section-A for noncash property contributions worth $5,000 or less. Complete section-B for noncash property contributions more than $5,000 and include a qualified appraisal to the return. The type of records they must keep depends on the amount and type of their donation.

Donations of $250 or More. If taxpayers donated cash or goods of $250 or more, they must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether they received any goods or services in exchange for the gift.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999.

Remember Donations May Cut Tax Bills

As tax filing season approaches, the Internal Revenue Service reminds taxpayers who give money or goods to a charity by Dec. 31, 2016, that they may be able to claim a deduction on their 2016 federal income tax return and reduce their taxes.

Only donations to eligible organizations are tax-deductible. IRS Select Check on IRS.gov is a searchable online tool that lists most eligible charitable organizations. Churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations even if they are not listed in this database.

Claiming Charitable Donations
Only taxpayers who itemize using Form 1040 Schedule A can claim deductions for charitable contributions.

Monetary Donations
A bank record or a written statement from the charity is needed to prove the amount of any donation of money.

Donating Property
For donations of clothing and other household items the deduction amount is normally limited to the item’s fair market value.

Benefit in Return.
Donors who get something in return for their donation may have to reduce their deduction.

Older IRA Owners Have a Different Way to Give
IRA owners, age 70½ or older, can transfer up to $100,000 per year to an eligible charity tax-free.

Good Records
The type of records a taxpayer needs to keep depends on the amount and type of the donation.

Courtesy of IRS.

For more information contact Neikirk, Mahoney and Smith at 502-896-2999