The IRS has long been suspicious of inflated deductions for charitable gifts. Now it’s giving fair warning to taxpayers.
Alert: Observe the strict letter of the law for substantiating charitable donations. The IRS recently posted a reminder on its website featuring nine tax deduction tips. (IRS Tip 2013-45, 4/1/13)
- To qualify for a deduction, you must make the donation to a qualified charitable organization. You can’t deduct contributions you make to an individual, a political organization or a political candidate.
- A taxpayer must file Form 1040 and itemize deductions on Schedule A. If the 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.
- 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. A few examples are merchandise, tickets to an event or other goods and services.
- Donations of stock or other noncash 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.
- Fair market value is generally the price at which someone can sell the property.
- 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 donations by text if it shows this same information.
- To claim a deduction for gifts of cash or property worth $250 or more, you must obtain a written statement from the qualified organization showing 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 (see No. 3).
- You may use the same document to meet the requirement for a written statement for cash gifts and the requirement for a written acknowledgment for contributions of $250 or more.
- If a taxpayer donates one item or a group of similar items that are valued at more than $5,000, Section B of Form 8283 must be completed.
Tip: For gifts valued above $5,000, obtain an appraisal from a qualified professional.
Like what you've read? ...Republish it and share great business tips!
Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...
We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.
The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.
" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/35536/irs-posts-9-tips-for-charitable-deductions "