Showing posts with label gifts to charity for tax deductions. Show all posts
Showing posts with label gifts to charity for tax deductions. Show all posts

Thursday, February 18, 2021

Charitable Gifts and Your 2020 Taxes

Everyone has items that they don’t need taking up space in their homes. And, the right thing to do isn’t to toss them in the trash, but to donate them! Thankfully, when you do donate these items, you may qualify for a tax deduction, but it’s not as simple as deducting the value of the item. Instead, there are tricky rules that you must navigate to help you make your decision.  


The Fair Market Value Question  

When you give an item, you have to take into consideration its current condition when determining its value, as well as what the average person would generally and reasonably pay for this item. Age and the overall shape the item is in play a big role in helping you to make this decision, but even with all those things considered, deciding on a value that the IRS would agree with can be tricky.  

That’s why it’s best to speak with a tax professional to help you find ways of reasonably determining value or, at the very least, to use an up-to-date tax program that can help you to come up with a safe value for deductions.  

When in Doubt, Opt for an Appraisal  

While fair market value can be helpful in determining the approximate value of basic items, like used clothing or home appliances, it doesn’t really work with more valuable things, such as cars or expensive artwork.  

In these cases, it’s a good idea to have a professional appraisal or other valuation process performed. For some items and some values, the IRS may even require it. At the very least, having an appraisal, whether it’s required or not, provides you with some protection in the event of an audit. But, really, in cases like these, professional tax help is strongly recommended to ensure you’re as protected as possible.  

Ultimately, giving charitable gifts is a wonderful thing. But, if you’re going to deduct the worth of those gifts from your taxes, you’ll need a little help, or at least a little research and effort, to ensure you report everything correctly.

Friday, December 5, 2014

Gifts to Charity for Tax Deductions

Many people give to charity each year during the holiday season. Remember, if you want to claim a tax deduction for your gifts, you must itemize your deductions. There are several tax rules that you should know about before you give. Here are six tips from the IRS that you should keep in mind:
1. Qualified charities. You can only deduct gifts you give to qualified charities. Use the IRS Select Check tool to see if the group you give to is qualified. Remember that you can deduct donations you give to churches, synagogues, temples, mosques and government agencies. This is true even if Select Check does not list them in its database.
Pile of gorgeous gifts2. Monetary donations.  Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.
3. Household goods.  Household items include furniture, furnishings, electronics, appliances and linens. If you donate clothing and household items to charity they generally must be in at least good used condition to claim a tax deduction. If you claim a deduction of over $500 for an item it doesn’t have to meet this standard if you include a qualified appraisal of the item with your tax return.
4. Records required.  You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.
5. Year-end gifts.  You can deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2014. This is true even if you don’t pay the credit card bill until 2015. Also, a check will count for 2014 as long as you mail it in 2014.

6. Special rules.  Special rules apply if you give a car, boat or airplane to charity. For more information visit IRS.gov.