Whether you’re a business owner or an individual, donating to charity makes you feel good. You like helping others and making a difference. Of course, it doesn’t hurt that those donations can give you a tax break. However, you need to know some important information before you file your tax return for 2017.
You Must Itemize Your Deductions
To get credit for your donations to charity, you’ll need to choose to itemize your deductions. The majority of filers use the standard deduction, which means they won’t get credit for their charitable giving. It pays to figure up all the expenses you may include in your taxes to see if you qualify. If using itemized deductions sounds too complicated for you, consider hiring a tax preparer who will know the latest rules in this area.
You Must Have a Receipt
You will need to get some kind of receipt for any donations you make to charity. It doesn’t matter if you’re dropping off used clothing or old furniture to the Salvation Army or giving money to a charity. You’ll need a record of what you gave and how much. Even if it’s clothing, you’ll need to assess a value to what you donate.
Thanks to modern technology, you can use your phone to contribute to your favorite charity. You may be able to submit a donation through text messaging or through an app. Many organizations will provide a receipt for your contribution. However, a bank statement or cell phone bill will provide proof as long as it lists the name of the organization and the date and amount of your contribution.
Not All Donations are Tax-deductible
Not all donations may be used as a tax deduction. You can’t claim any money given to politicians or political organizations. You also can’t count any contribution you make to a person. Even worthy organizations may not be included unless they are a nonprofit. You can donate to the US government, to fraternities and associations that use the lodge system for operation, organizations for war veterans and some nonprofit cemeteries. Other organizations which are marked as nonprofit will also be eligible, such as the humane society, American Red Cross and others that provide help to a particular group with no profit for them. If you aren’t sure whether your donation fits in this group, you can talk to an accountant.
When to Fill Out Form 8283
You may be required to fill out Form 8283, Noncash Charitable Contributions to be included with your tax return. This form is necessary if you have donated noncash items in excess of $250. You’ll need a written acknowledgment which details the date the item was acquired, it’s value and how much you paid for it. While you won’t need to send this acknowledgment to the IRS, you should keep it in case you’re audited.
If your item is valued at more than $5,000, you may need a written appraisal for it. An example of this situation is when people donate old vehicles to a charity. If the vehicle has a value over this threshold, you’ll need to have it appraised to count it in your donations.
Donating a Vehicle is a Unique Situation
If you donate a car, boat or other vehicle, you have special rules which must be followed. As long as the item is valued at less than $500, you can claim the total value. If it’s more than this amount, what you can claim will depend on what the charity does with it. Many times, the organization will sell the vehicle at an auction to use the funds. In this situation, you can claim only what the vehicle sold for even if it’s less than the fair market value (FMV).
If the organization chooses to keep the vehicle and use it, you can deduct the FMV for your tax return. You will have to get a written acknowledgment form from the charity if your vehicle is valued at more than $500.
As you can tell, charitable donations can be complicated when it comes to your tax return. To ensure you get credit for what you donate while abiding by the tax laws in place, you may want to find a tax preparer. They will know the latest laws and how to give you credit for your good deeds.
