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Charity Donations and Tax Deduction

November 29, 2013

Charitable contributions are tax deductible if they are made to qualified organizations. An organization that has a tax-exempt status is not necessarily a qualified charity for tax deduction purposes.

Charitable contributions made to organizations such as specific individuals, political organizations and candidates, and non-qualified charities are not tax deductible. If the primary goal of a taxpayer is to minimize their tax bill, then charitable contributions should only be made to qualified charitable organizations.

When deducting taxes on contributions made to charitable organizations, it is important to remember that you can only deduct the amount that exceeds the fair market value of the benefits, if any, received by you for making the contribution such as free tickets to a game, a handbag or other merchandise. If a donation is not made with cash, but with stock or other non-cash items, the fair market value of the items given in charity will be considered.

When making charitable contributions, taxpayers must have written records of the contribution. The record/receipt must have the amount of the cash received by the qualified charitable organization, date on which the contribution was made and the name of the organization. Without these details, the IRS will not accept the deduction. A single document is sufficient for monetary gifts of $250 or more. If the total deduction for noncash contribution exceeds $500 for a year, you will need to file IRS Form 8283, Noncash Charitable Contributions, with your tax return.

In cases where taxpayers do not have a written record/receipt for cash contributions of $250 or more, they may use a bank record or payroll deduction records as documentary proof to the IRS. The IRS requires the name of the receiving organization, the date of the contribution, and the amount given. Even if contributions are made through text messages or telephone calls, if taxpayers have the name of the organization, the date of the contribution and the amount given, they can use the document to get a deduction.

If the cost of an item donated exceeds $5,000, taxpayers need to complete Section B of IRS Form 8283.

Special rules apply in case of vehicle donations.

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