While giving to charity is straightforward enough, claiming your charitable deductions can be complicated. For one thing, you must itemize deductions, something many filers avoid in preference for taking standard deductions, which makes filing taxes less complicated. The latter option, however, will not give you as much of a reduction on your tax bill. If you want a larger tax benefit from your donations and think you will itemize your deductions this tax season, then consider the information below to successfully claim your charitable deductions.
In order to deduct your charitable contribution, you must first donate to a qualifying organization. These are groups that have received 501(c)3 status from the Internal Revenue Service (IRS). To determine whether your favorite charity qualifies, ask the organization for proof of their status and contact the IRS for confirmation that the group remains in good standing. Alternatively, look at Publication 78, which is a list of charities eligible to receive tax-deductible, charitable contributions and is available at the IRS website.
If you are donating household items or giving away clothing and shoes, you must assign fair market value to receive a deduction. Fair market value would be the cost of the items at a local thrift store, not the price at which you bought them. In many cases, and depending on the item, that amount will be half the purchase price. If these non-cash donations are worth $500 or more, you must complete IRS Form 8283, the Non-Cash Charitable Contributions form, and submit it with your tax return. If the property donated is worth $5,000 or more, complete Section B of Form 8283. The form must be accompanied by an appraisal from a qualified appraiser.
While the federal government wants tax payers to freely give to charities, it also does not want fraudsters to take deductions for contributions they in fact did not make. Consequently, the IRS requires documentation of your donation to sign off on your deduction. You can submit bank statements and canceled checks as evidence of a donation. If you gave cash or property worth $250 or higher, you are required to include a receipt or letter of acknowledgment from the charity you gave to.
Many people prefer to give of their time or services to charitable organizations, but such donations are not always deductible. You also cannot claim a deduction for letting a charity use your property rent-free. However, if you indirectly spend money in support of your favorite charity, such as buying groceries to cook food for a homeless shelter, or buying gas to complete a mission assigned to you by the charity, you can claim those expenses as charitable contributions. Additionally, any items donated must be in good or better condition. If you give pre-owned pieces that are in less than good condition, the IRS may reject your deduction request and deem the items to be of “minimal monetary value.” The IRS looks closely at your valuations and those by the receiving charity to ensure you are not overestimating your donated items.