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Know these facts before deducting a charitable donation


 

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. Taxpayers may be able to prepare and e-file their tax return for free using IRS Free File. The type of records they must keep depends on the amount and type of their donation. To learn more about what records to keep, see Publication 526, Charitable Contributions.

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.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at https://www.irs.gov/individuals/electronic-filing-pin-request.

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Nine tips on deducting charitable contributions


Giving to charity may make you feel good and help you lower your tax bill. The IRS offers these nine tips to help ensure your contributions pay off on your tax return.

1. If you want a tax deduction, you must donate to a qualified charitable organization. You cannot deduct contributions you make to either an individual, a political organization or a political candidate

2. You must file Form 1040 and itemize your deductions on Schedule A. If your total deduction for all noncash contributions for the year is more than $500, you must also file Form 8283, Noncash Charitable Contributions, with your tax return.

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 or other goods and services.

4. Donations of stock or other non-cash property are usually valued at fair market value. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to vehicle donations.

5. Fair market value is generally the price at which someone can sell the property.

6. You must have a written record about 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. A telephone bill meets this requirement for text donations if it shows this same information.

7. 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.

8. You may use the same document to meet the requirement for a written statement for cash gifts and the requirement for a written acknowledgement for contributions of $250 or more.

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.

For more information on charitable contributions, see Publication 526, Charitable Contributions. For information about noncash contributions, see Publication 561, Determining the Value of Donated Property. Forms and publications are available at Irs.gov or by calling 800-TAX-FORM (800-829-3676).

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