It's Better to Give AND Receive - Part II
by Bob Williams
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Last time, we told you how to make sure your charity of choice is seen as tax-exempt by the IRS. Now it’s time to look at giving yourself a little credit for doing the right thing.
Once you’ve picked where your donation will go, you have some more personal choices to make – not the least of them is whether you’ll itemize your deductions. You can only deduct your charitable contributions if you itemize, using Form 1040, Schedule A. And only those contributions actually paid out during the tax year you’re filing will count.
Stuff Instead of Cash
In general, you can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. But be mindful that special rules apply to donations of clothing, household items, cars and boats.
If the charity gives something in return for your donation – let’s say, tickets to a baseball game, for example – you can only deduct the amount of your contribution that exceeds the fair market value of the item or service received.
We can’t stress enough the importance of keeping good records when it comes to taxes – but especially when charitable contributions are involved. For small donations – under $250 – a bank or credit card statement is sufficient. But if you give more than $250 to an organization, you’ll need a written acknowledgement from them that includes how much money you gave, and whether any material incentive or premium (like those baseball tickets) was involved. If you donated property, the acknowledgement should include a description of the items and a good-faith estimate of their value.
If you donate items worth $500 or more, you’ll need to complete Form 8283, Noncash Charitable Contributions, and attach it to your return. If the property is worth more than $5,000 you generally must get the property appraised and complete Section B of Form 8283 with your return.
If you’re not sure how much your potentially donated property is worth, check out IRS Publication 561, Determining the Value of Donated Property. It may not help you get more at the next church rummage sale, but it might put more coins in your pocket when you get your refund from the IRS.
And that’s a gift that keeps on giving.
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