If you gave a gift of cash, property, or even securities to a tax-exempt charity last year, these can be included as charitable income tax deductions. Donated items save you money come tax time, while providing needed goods for others.
• Describes tax-exempt organizations
• Makes clear what can be counted as tax deductible donations
• Explains how to estimate all your charitable tax deductions
Make claiming deductions easier
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Only contributions made to qualified charitable organizations can be included as tax deductible donations.
When you make a contribution simply ask the organization whether they are tax-exempt. You can also call the IRS (800-829-3676) and request Publication 78 to be sent to you. This tax publication lists all qualifying organizations. (We tried, but this publication is not available for download anywhere.)
Typically, religious organizations, public parks, nonprofits, war veterans' groups, and groups benefiting others all qualify.
Also, when you make any tax deductible donations, ask the organization which percentage limitation they are subject to, and write it down in your records. When you are filing taxes, you are required to enter this information for all your tax deductible donations to any charity.
Sidebar The easiest way to claim your charitable income tax deductions, and all other deductions is to file online. Claiming deductions can be confusing, but you can make it simple and avoid costly mistakes, by using the H&R Block e-filing interview.
What are tax deductible donations?
Cash donations are the easiest tax deductible donations. As long as you received nothing in return you simply enter the name of the charitable organization and the amount you donated. Make sure you also have a receipt as proof of your donation.
If you do receive something in return, but it is of clearly lesser value, you can enter the difference between your donation and the actual worth of the gift you received from them.
It's simple: if you make a tax deductible donation of $100 to a qualified organization and they send you a complimentary book that costs $25, only enter $75 in tax deductible donations.
Making a contribution of property, such as clothing or other goods, is deductible, but requires some record keeping. The amount you are allowed in charitable income tax deductions is the fair market value of the item at the time of donation. The fair market value is the price someone would be willing to pay for the item.
If you are planning on claiming any non cash contributions as charitable income tax deductions, you should download IRS Publication 561 which lists the fair market value of qualified items. If you are making any charitable income tax deductions for a single item with a fair market value (FMV) of over $500, Form 8283 must also be completed.
Appreciated securities as tax deductible donations
An excellent way to save on taxes, and a good deed to boot, is to donate appreciated stock (or mutual funds, or other investments) to a charitable organization.
When you do this, you are able to avoid the dreaded capital gains tax, while benefiting from the increased value of your security.
Note: this only applies if you purchased the security more than a year making it a donation. If you bought Microsoft two months ago, and gave it to the United Way last week, your charitable income tax deductions would only total what you paid for it.
Related IRS publications
You can get more information about charitable income tax deductions directly from the IRS, in the form of IRS Publication 526
To help you figure out the fair market value of donated property, the IRS provides their own guidelines in Publication 561.
If you file a paper tax return, you will also need to attach IRS Form 8283, for donated property, and enter the total amount you claim for tax deductible donations on the appropriate line of your Schedule A. If you file online, the forms for claiming any charitable income tax deductions will be completed for you.
Note: you will need an Adobe Acrobat Reader to view these publications, which you can get here. (But you probably already have it.)
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