25 Nov Know Your Charitable Deduction Rules
With the end of the year approaching, many of us are in a giving frame of mind. In addition to gifts to family and friends, it’s a great time of year to make charitable contributions. Even better, there may be tax benefits in doing so.
According to the Internal Revenue Service, giving money or goods to a tax-exempt charity before Dec. 31 can usually be deducted on that year’s federal income tax return. Of course, donations must be made to qualifying organizations, which include nonprofits, schools, government agencies, churches, temples and mosques. The IRS hosts a searchable online database that lists most charitable organizations at https://www.irs.gov/charities-
If you itemize your taxes, you can claim deductions for charitable contributions. The experts at Palm Beach Tax Service can help you determine if your donations are eligible to be deducted based on whether or not you itemize.
Bank records or written statements from the charity providing the amount and date of any monetary donations are necessary, according to the IRS. Monetary donations can include cash, check, electronic funds transfer, credit card and payroll deduction. If you give via payroll deduction, you’ll want to keep a pay stub, Form W-2 wage statement or other proof showing the total amount given to the charity along with a pledge card showing the charity’s name.
You also have the option of donating clothing or other household items. The deduction mount is typically limited to the item’s fair market value. Clothing or household items must be in good condition to be tax-deductible. If you donate an item worth $500 or more, you’ll need a qualified appraisal to go with your tax return.
For items worth $250 or more, you’ll need a written acknowledgement that describes the items contributed. Special rules apply to cars, boats and other types of property donations. You can find information about how to determine the value of donated property on the IRS.gov website.
If you receive something in return for your donation, you may have to reduce your deduction. Benefits can include merchandise, meals, tickets to an event or other goods or services. You must receive a donation acknowledgement stating whether the organization provided any goods or services in exchange for the gift along with a description and estimated value of the goods and services.
Another giving option exists for IRA owners age 70-1/2 or older, who can transfer up to $100,000 per year tax-free to an eligible charity. The transfer can count as their required minimum distribution for the year. Funds must be transferred directly by the IRA trustee to the eligible nonprofit recipient.
Taxpayers need to keep good records depending on the mount nd type of the donation. The government requires an additional reporting form for many property donations and an appraisal is often required for larger donations.
The experts at Palm Beach Tax Service can help you understand all of the rules and regulations pertaining to charitable deductions. You can also count on Palm Beach Tax Service for Palm Beach bookkeeping assistance, Palm Beach accounting work and guidance on all your Palm personal finance needs.