Charitable Contributions

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					Charitable Contributions

Making charitable contributions is an easy and effective way to lower your taxes. You are eligible to
take a deduction for contributions or gifts made to certain qualified organizations. The contributions
can either be in the form of money or property. You must file Form 1040, U.S. Individual Income Tax
Return, and itemize deductions on Schedule A, Itemized Deductions, to take advantage of this deduc-
tion.

Contributions in General

A charitable contribution is a donation or gift to, or for use by, a qualified organization. It is voluntary
and is made without getting, or expecting to get, anything of equal value in return. Deductible chari-
table contributions include money or property given to qualified organizations, your out-of-pocket
expenses when you serve as a volunteer for a qualified organization, and certain expenses you pay
for a student living with you who is sponsored by a qualified organization.

Deductible charitable contributions do not include the following, even if given to a qualified organiza-
tion:
Cost of raffle, bingo, or lottery tickets
Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar organizations
Tuition
Value of your time or services
Value of blood given to a blood bank

Qualified Organizations

You can deduct contributions made to a qualified organization. To be considered qualified, most orga-
nizations (other than churches) must apply to the IRS. Local fundraisers for community members in
need of assistance will not be considered qualified organizations unless they have been approved as
such by the IRS.

Examples of some qualified charitable organizations include the following:
Churches, synagogues, temples, mosques, and other religious organizations
Most nonprofit organizations, such as Salvation Army, Red Cross, CARE, Goodwill Industries, United
Way, Boys and Girls Clubs of America.
Nonprofit hospitals and medical research organizations
Nonprofit schools
Most nonprofit, educational organizations such as Future Business Leaders of America, 4-H Club,
and Junior Achievement
Nonprofit volunteer fire and rescue departments
Public parks and recreation facilities
War veterans’ groups such as Disabled American Veterans and Purple Heart
Federal, state, and local governments if your contribution is solely for public purposes, such as a gift
to reduce the public debt
Some examples of non-qualified organizations:
Homeowners’ associations
Political groups or candidates for public office
Organizations whose purpose is to lobby for law changes
Individuals
Organizations run for personal profit
Civic leagues, social clubs and sports clubs
Labor unions
Chambers of commerce
Foreign organizations except certain Canadian, Israeli, and Mexican charities


Date of Contribution

Usually, you may deduct charitable contributions only in the year they are actually made. A check that
you mail is considered delivered on the date you mailed it. A contribution charged on a credit card is
deductible in the year you make the charge. The amount of your deduction may be limited depending
on the type of property given and the type of organization to which it is given. Some contributions that
you are not able to deduct in the current year because of adjusted gross income limits may be carried
over to future years.


Item (Non-cash) Donations

Extra tax deductions may be as close as your closet. If you donated clothing, toys, furniture, or other
household items to charity, you are allowed to deduct the fair market value of your donated items.
However, no deduction is allowed for these items unless they are in at least good used condition.
The IRS does not provide a guide to determine the fair market value suggesting, instead, taxpayers
survey thrift and consignment stores for similar items to provide an indication of the item’s fair market
value.
Generally, the deduction for property contributed is equal to the fair market value of the property at
the time of the contribution. Different rules may apply if the value of the property has increased or for
vehicle donations.
IRS Publication 561, Determining the Value of Donated Property, provides general IRS guidelines on
noncash donations.
IRS Publication 78, Cumulative List of Organizations described in Section 170(c) of the Internal Reve-
nue Code of 1986, is an online publication maintained by the IRS and includes all qualified charitable
organizations.


Vehicle Donations

If you donate a qualified vehicle valueed at more than $500, you will not be allowed to take a charita-
ble deduction unless you get a written acknowledgement of the contribution from the charitable orga-
nization (usually within 30 days) and include the acknowledgement with your tax return. The amount
of your deduction is limited by the organization’s use of the vehicle. If the charitable organization
sells the donated vehicle without having significantly used the vehicle for charitable purposes, gener-
ally your charitable deduction cannot be greater than the amount the organization received from the
sale of the vehicle. If the organization uses the vehicle for charitable purposes, you should be able
to deduct the fair market value of the vehicle immediately preceding your donation. The organization
should issue a Form 1098-C to provide you with the required information. For this purpose, qualified
vehicles include motor vehicles, boats, and aircraft.
IRS Publication 4303, A Donor’s Guide to Car Donations, provides general IRS guidelines on car
donations.
Exchange Students

If you have an American or foreign exchange student living in your home, you may be able to deduct
up to $50 per month as a charitable deduction on Schedule A. You must have a written agreement
from a qualified organization that provides the student program. The student cannot be your depen-
dent or a relative, and must be a full-time student at the high school level or below.

Expenses that you may be able to deduct include the cost of books, tuition, food, clothing, transporta-
tion, medical and dental care, entertainment and other amounts you actually spend for the well-being
of the student. They do not include general household expenses, such as rent, mortgage payments,
taxes, insurance, repairs or the fair market value of lodging.

If you are compensated or reimbursed for any part of the costs of having a student living with you,
you cannot deduct any of your costs unless you are reimbursed for only an extraordinary or a one-
time item, such as a hospital bill. In this case, you can deduct the expenses for which you were not
reimbursed.

You cannot deduct the costs of a foreign student living in your home under a mutual exchange pro-
gram through which your child will live with a family in a foreign country.


Volunteer Activities

You can deduct the out-of-pocket expenses incurred while serving as a volunteer for a qualified or-
ganization. This includes the cost of uniforms not suitable for everyday use that you must wear when
volunteering, travel expenses where no significant element of personal pleasure is involved, and ve-
hicle expenses for which you can deductout-of-pocket expenses, such as the cost of gas and oil, or14
cents per mile. For volunteer mileage in certain federally declared disaster areas the allowable rate is
higher. The value of your time or services cannot be deducted.


Partially Deductible Contributions

If you attended a charity benefit or event, you may be able to deduct the dollar amount that is more
than the fair market value of the event. For example, if you attended a dinner fundraiser for a qualified
non-profit organization for $65 a ticket and the regular meal price is $10, your contribution amount
would be $55.

If you receive goods or services in exchange for your contribution, you can deduct only the amount of
the payment that is more than the value of the goods or services received. For example, if you spent
$20 on Girl Scout cookies and it would have cost $15 to purchase the cookies from the store, then
you would be able to deduct $5.

If the payment is more than $75, the qualified organization must give you a written statement that
indicates the value of the goods or services received.
Direct Contributions from an IRA

If you are 70 1/2 or older, you can make a direct transfer of up to $100,000 from your IRA to any
qualified charity. These direct transfers, or Qualified Charitable Distributions (QCD), are considered
to be part or all of your minimum required distribution (MRD) for the year. QCDs are not taxable and
you are not allowed to clam them as a charitable deduction on your tax return. Any distributions that
are not CDs are subject to the normal rules for IRA distributions.


Records to Keep

The IRS requires you to keep a written acknowledgement from the charitable organization for any
single cash or property contribution of $250 or more. You are also required to keep records and re-
ceipts for all contributions regardless of the amount or value.

For the contributions of less than $250, you should have a canceled check, receipt from the organiza-
tion, or other reliable written documentation of the contribution. For all cash contributions, you must
have either a bank record or a receipt from the organization. For contributions of $250 or more, writ-
ten acknowledgement of the contribution from the qualified organization is required to claim the de-
duction. For property with a fair market value of more than $500, you must include a written descrip-
tion of the donated property with your tax return.

For contributions of property, you should have a receipt indicating the name of the charitable orga-
nization, date and location of the contribution and description of the property. You should also have
written documentation that includes, in addition to the information on the receipt, the address of the
organization, the fair market value of the property at the time of the contribution, and how the fair mar-
ket value was determined. If you have total property contributions of more than $500, you will need to
complete Form 8283, Non-cash Charitable Contributions , and attach it to your return. If you donated
property with a fair market value exceeding $5,000, you must get a written appraisal by a qualified ap-
praiser and include the appraisal with your tax return.

For contributions of qualified vehicles (such as motor vehicles, boats, and aircraft) with a claimed
value of more than $500, the charitable organization must provide you with a separate written ac-
knowledgement of the contribution (usually within 30 days). Form 1098-C should include the following
necessary information:
Your name and identification number (usually your Social Security number)
A number that identifies the vehicle, such as the vehicle’s VIN (vehicle identification number)
If the organization sells the donated vehicle without having made material modifications to it or with-
out having significantly used the vehicle for charitable purposes:
A certification that the vehicle was sold in an arm’s-length transaction between unrelated parties
The gross proceeds received by the charity from the sale
A statement that the deductible amount for the donated vehicle may not exceed the gross proceeds

If the organization keeps the donated vehicle for its use:
A certification stating how the charity intends to use the donated vehicle, for how long, and whether
material improvements will be made to the vehicle
A certification that the vehicle will not be exchanged before the period of intended usage has ended
or the intended improvements have been made

				
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