This is the time of year where philanthropy is given a lot of attention, many non-profits count on the end of year gifts to meet their budgets. Below are a few reminders to keep in mind as you plan your year-end charitable gifts.
- Qualified charities – Only donations to eligible organizations are tax-deductible. Select Check, a searchable online tool available on IRS.gov. A taxpayer must have a bank record or a written statement from the charity in order to deduct any donation 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, 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 date. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations. That is true even if they are not listed in the tool’s database.
- Year-end gifts –Contributions are deductible in the year made. Therefore, donations charged to a credit card before the end of 2014 count for 2014, even if the credit card bill is not paid until 2015. Also, checks count for 2014 as long as they are mailed in 2014.
- Itemize deductions – For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction. This includes anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2014 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
- Record donations –For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
- Special Rules – The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
Rules for Charitable Contributions of Clothing and Household Items
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 clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return.
Donors must get a written acknowledgement from the charity for all gifts worth $250 or more. It must include, among other things, a description of the items contributed.