Tax Deductible Donations to Charity Organizations – 7 Important Points

tax deductible donationsTax deductible donations are much better tax planning . Why ? Because you not only help society , but do the tax savings also. As you know , Internal Revenue Code allows a tax payer to claim  itemized deduction for  a voluntary charitable contributions  in cash or gift to, or for the use of, a qualified charity organization. Given below are the seven most important point to remember for claiming of deduction for  charitable contribution

File Form 1040 and itemize deductions

In order to claim tax deductible donations , you must file Form 1040 and itemize deductions on Schedule A (Form 1040).

What are the best charities to donate to ?

The deduction to be itemized on the Form 1040 is available for contribution or donation if the organization is approved as a qualified charitable organization .The list of charity organizations is indeed quite longGenerally , Churches, synagogues, temples, mosques, and other religious organizations are organizations to donate to . Likewise Federal, state, and local governments, Nonprofit schools and hospitals , The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America, etc. War veterans’ groups are listed and approved organization . But ,  it is better you ask the organization if they are approved and in fact , can check through charity checker  to find organizations to donate to.

What Can be Contributed ?

  1. Generally, you can deduct contributions of money or property you make to, or for the use of, a qualified organization. A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. The contributions to an organization that is  set aside for use by a specific person is not allowed to be deducted.
  2. If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution.
  3. Contribution can also be in form of letting qualifying expenses for a foreign or American student . Then $50 a month for each full calendar month can be deducted for letting student living with you
    1.  Lives in your home under a written agreement between you and a qualified organization as part of a program of the organization to provide educational opportunities for the student,
    2. The student should not be your relative or dependent on you , and
    3. Student is  a full­time student in the twelfth or any lower grade at a school in the United States.

Is there charitable donations limit ?

Answer is yes .

  1.  Your deduction for charitable contributions generally can’t be more than 50% of your adjusted gross income (AGI), but in some cases 20% and 30% limits may apply.
  2. In addition, the total of your charitable contributions deduction and certain other itemized deductions may be limited.
  3. If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive.
  4. If you pay more than fair market value to a qualified organization for goods or services, the excess may be a charitable contribution. For the excess amount to qualify, you must pay it with the intent to make a charitable contribution.
  5. You may be able to deduct membership fees or dues you pay to a qualified organization. However, you can deduct only the amount that is more than the value of the benefits you receive. You can’t deduct dues, fees, or assessments paid to country clubs and other social organizations. They aren’t qualified organizations

Don’t Forget Charitable Contribution Receipt

A qualified organization must give you charitable donation receipt -a written statement if you make a payment of more than $75 . The statement must say you can deduct only the amount of your payment that is more than the value of the goods or services you received. It must also give you a good faith estimate of the value of those goods or services. The organization can give you the statement either when it solicits or when it receives the payment from you

What contribution can not get you any deduction ?

You can’t deduct as a charitable contribution:

1. If it is to a specific individual,

2. If contribution is to a non-qualified organization,

3. If you  you receive or expect to receive a benefit on account of contribution.

4. If you  value of your time or services to charitable organization and 

5. Your personal expenses,

6. A qualified charitable distribution from an individual retirement arrangement (IRA),

7. Appraisal fees for property you donated 

8. Certain contributions to donor­ advised fund which is fund or account in which a donor can, because of being a donor, advise the fund how to distribute or invest amounts held in the fund.  or

9. If you donate partial interests in property, such contribution can not be deducted

Special Rules for Claiming Tax Deductible Donations to Charity Organizations

Special rules of allowance of deduction for contribution in form of non-cash donations apply :

  • Clothing or household items – deduction is allowed only if the condition of clothing or household goods is good. For this , it is better if you attach an appraisal report for the goods.
  • A car, boat, or airplane. Just note that  if fair market value of the vehicle is more than $500, then you will have to include Form 1098­C and maximum you can  deduct is the smaller of:
    • The gross proceeds from the sale of the vehicle by the organization, or
    • The vehicle’s fair market value on the date of the contribution
  • Taxidermy property,
  • Property subject to a debt,
  • A partial interest in property,
  • A fractional interest in tangible personal property,
  • A qualified conservation contribution,
  • A future interest in tangible personal property,
  • Inventory from your business, or
  • A patent or other intellectual property.

You can refer IRS publication 526, charitable contributions.


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