Do Charitable contributions lower your tax bill? Charitable contributions made to qualified organizations may help lower your tax bill. 1) Contributions must be made to a qualified organization in order for you to have a legitimate tax deduction. You can verify at irs.gov/charities, if a charity is approved to receive deductible charitable contributions. 2) You must file Form 1040, Individual Income Tax Return, and itemize your deductions on Schedule A. 3) If you receive a benefit as a result of your contribution, such as merchandise, tickets to a ball game, dinner or other goods and services, you can only deduct the amount that exceeds the fair market value of the benefit received. 4) All donations of stock or other non-cash property should be valued at the fair market value of the property. Clothing and household items must generally be in good, used condition or better to be deductible. Special rules apply to vehicle donations. 5) Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. 6) In order to deduct any contribution of cash, check or other monetary gift, taxpayers must maintain a bank record, payroll deduction records or written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the recordkeeping requirement if it shows the name of the receiving organization, the date of the contribution and the amount given. 7) Contributions of cash or property equaling $250 or more must have a written acknowledgment from the qualified organization or certain payroll deduction records. The acknowledgement must be written and include the amount contributed — or a description of the property contributed — and whether the organization provided any goods or services in exchange for the gift. If you received any goods or services, the acknowledgement must provide a description and good faith estimate of the value. The acknowledgement should state that the only benefit you received was an intangible religious benefit, if that was the case. 8) Taxpayers must obtain an appraisal by a qualified appraiser if they are donating an item or a group of similar items valued at more than $5,000. You cannot take a deduction for contributions made to specific individuals, political organizations or candidates or most foreign organizations.
Posted on: Fri, 25 Oct 2013 14:37:49 +0000