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Considerations for Charitable Deductions

by Kristin P. Sinclair – A Accu Tax – March 22, 2018

If you donated money or items to a charity in 2017, then you may be able to claim a deduction on your federal tax return. You should consider the following about charitable deductions.

A.) Qualified Charities: You must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible.

B.) Itemize Deductions: To deduct charitable contributions normally you must itemize deductions on Schedule A of your form 1040.

C.) Return Value: When you receive a thank you gift or most any item of value in return for your donation, then you must reduce your charitable deduction by the return value you received. Examples of return value include merchandise, meals, tickets to
events or other goods and services.

D.) Donation Type: When you donate property instead of cash, then your tax deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price you should expect if the property is sold by the charity. When you donate used clothing and household items, those items generally must be in good or better condition. Special rules apply to cars, boats and other types of property donations.

E.) Noncash Charitable Contributions: Use form 8283 for all noncash gifts totaling more than $500 for the year. Complete section-A for noncash property contributions worth $5,000 or less. Complete section-B for noncash property contributions more than $5,000 and include a qualified appraisal to the return. See IRS publication 526 for more details.

F.) Donations of $250 or More: When you donate cash or goods of $250 or more, then you must have a written statement from the charity. The statement must show the amount of the donation and a description of any property given. It must also say whether you received any goods or services in exchange for the gift.

Cash contributions are by cash, check EFT, debit card, credit card, and payroll deduction.

G.) Records: You should normally plan to keep a copy of your tax return and the supporting documents for at least 7 years. More details at www.IRS.gov.

H.) Tax Year 2018: Please note that Tax Year 2018 brings significant changes to the charitable deductions. With the higher standard deduction, many of us may no longer benefit by itemizing on Schedule A. Thus many of us may lose the tax benefits of charitable contributions.

A charitable contribution option that remains is to direct transfer an IRA up to $100,000 per year to a qualified charity. This contribution never hits your Adjusted Gross Income and you should not pay taxes on this gift. This IRA strategy is available to most that reach age 70.5 in 2018.

A second option is to group or bunch your charitable contributions every second or third year; as opposed to making smaller contributions every year. In the years you make charitable contributions you benefit from itemizing; and in the intervening years when you take the standard deduction.

 

Updated by Kristin P. Sinclair: A Accu Tax

in Charlotte NC and Rock Hill SC

March 22, 2018   (803)329-0609

KPS: More information is available at IRS.gov.

See Publication 590-A and Publication 590-B.

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