Contact NGAS now – we are here to help review your charitable contributions and complete your tax return
Donating to your favorite Charity can qualify as a beneficial itemized deduction on your tax return, however, it is important to understand what qualifies as a contribution and what is a qualified organization.
To confirm if an organization is tax exempt and eligible to receive tax-deductible charitable contributions:
- To see if an organization is exempt per the IRS click here
- Call the IRS 1-877-829-5500
- Ask the organization for the documentation to verify their qualified charitable status
Types of Charitable Contribution – CASH or NON-CASH?
For any contribution of $250 or more (including contributions of cash or property), you must obtain and keep in your records a contemporaneous written acknowledgment from the qualified organization indicating the amount of the cash and a description of any property contributed.
The acknowledgment must say whether the organization provided any goods or services in exchange for the gift and, if so, must provide a description and a good faith estimate of the value of those goods or services. One document from the qualified organization may satisfy both the written communication requirement for monetary gifts and the contemporaneous written acknowledgment requirement for all contributions of $250 or more.
Example of CASH Charitable Contributions:
- Cash (includes credit card, check, money order, payroll deduction)
- Out-of-pocket expenses incurred while providing volunteer services to a charitable organization
- Auto expenses (mileage) when servicing as a volunteer
- Expenses paid for a student living with you under a written agreement sponsored by a qualified organization
A taxpayer must have a bank record or a written statement from the charity in order to deduct any contribution of money, regardless of amount. The record must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.
Contributions of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
Example of NON-CASH Charitable Contributions:
- Clothing or household goods
- A car, boat or airplane
- Antiques, artwork, or a collection
- Jewelry or gems
- Stocks and bonds
- Business property/inventory
Household items include furniture, furnishings, electronics, appliances and linens. Clothing and household items donated to charity generally must be in good used condition or better to be tax-deductible. A record detailing what was given must be maintained, for example:
- Name and address of charity
- Date donated
- Description of items
- FMV of each item
- Date originally acquired
- Cost or basis in each item
Goodwill has a Valuation Guide to help determine FMV.
The Taxpayer must complete and attach Form 8283 to the return, if the deduction for a non-cash contribution is more than $500 but under $5,000. Special rules apply to contributions of certain types of property such as automobiles, inventory and investments that have appreciated in value, as well as non-cash charitable contributions more than $5,000.
Sometimes understanding what qualifies as a charitable contribution can become very confusing. Remember NGAS is here to help you with those questions and complete your tax return. Contact NGAS now to set up an appointment.