12 Tips for a Season of Giving

by Chris Powers, CPA

For many, the holiday season inspires feelings of generosity. So if you’re thinking of making a contribution to a charitable organization, be sure to keep the following tips in mind.

1. Be sure you are giving to a qualified organization. Examples of qualified organizations include churches, nonprofit charitable or educational organizations (United Way or Girl Scouts), nonprofit hospitals and research organizations, and nonprofit firefighter organizations.

2. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. Minnesota also allows a deduction on the state return for those who do not itemize and contribute more than $500.

3. If you receive a benefit because of your contribution, such as merchandise, tickets to a sporting event, or other goods and services, you may deduct only the amount that exceeds the fair market value of the benefit received.

4. Donations of stock or other non-cash property are usually valued at fair market value. Fair market value is typically the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all relevant facts.

5. Donated clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.

6. Don’t forget about qualified travel (mileage) for the organization’s activities.

7. Out-of-pocket expenses you incur while rendering services for an organization can create a tax deduction, too.

8. You can also donate land, works of art, grain, and life insurance policy ownerships.

9. We are hoping Congress reinstates legislation that allows you to contribute $100,000 or less directly from your IRA to a qualified organization as a contribution. Please check with your tax professional to find out if this has been extended.

10. To claim a deduction for contributions of cash, check or other monetary gift of any amount, you must maintain a bank record, payroll deduction records, or written communication (such as a receipt) from the organization containing the organization’s name and the date and amount of the contribution. For donations made via text message, a telephone bill will meet the record-keeping requirement — as long as it shows the name of the receiving organization, the date of the contribution, and the amount given.

11. To claim a deduction for contributions of cash or property equaling $250 or more, you must follow the requirements listed in tip #10 and obtain an acknowledgment from the organization. The acknowledgement must show the amount of cash and a description of any property contributed, as well as whether or not the organization provided any goods or services in exchange for the gift. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.

12. If you donate an item or a group of similar items valued at more than $5,000, you must attach an appraisal to your return.

Reach out to our team to discuss your charitable giving and don’t forget — make your contribution by December 31 to receive a tax deduction on this year’s taxes!

Source: IRS.gov