Building a business that stewards the welfare of your local community is an invaluable segment of becoming a significant organization in your neighborhood, city or state. Charitable contributions not only demonstrate your organization’s enthusiasm and support, but can also help improve and foster your local community. The IRS provides businesses and individuals highly beneficial incentives for making charitable contributions. Before pursuing the good causes, be sure to read up on deducting charitable contributions.
Below are a handful of helpful tips to guide you through the deduction process and paperwork.
- To complete a legitimate tax deduction from a charitable contribution, it must be going towards a qualified organization and cannot be deducted from charitable contributions made to individuals or political parties. If you visit www.irs.gov, there is an Exempt Organizations Select Check Tool. This is a wonderful resource for determining whether or not an organization qualifies for a charitable contribution.
- File a form 1040, itemizing the deductions in order to deduct a charitable contribution. This form is available at www.irs.gov.
- Be cautious while making a deduction if you receive any benefit or item from the contribution. For instance, if you acquire an item from a charitable auction, you can only deduct the amount exceeding value of the item received. That goes for any services or products of any value.
- Donations of non-cash material such as clothing, household items, or other products must generally be in good used condition or better to be deductible.
- Fair market value is basically the price of a property being sold between a willing buyer and seller, who are both informed on all of the applicable facts regarding the property.
- Always keep your paperwork. No matter what the amount of deduction, be sure to keep a bank record, payroll deduction records or written communication from the charitable organization that received the contribution. This paper trail must include the name of the organization, the date of transaction, and the exact amount of the contribution.
- Any deduction more than $250 requires written acknowledgment from the organization that received the contribution. If your total deduction for non-cash contributions for a given year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
- Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.
For more information on charitable contributions, refer to Form 8283 and its instructions, as well as Publication 526, Charitable Contributions. These forms and publications are available at www.irs.gov.
TIPS COURTESY OF WWW.IRS.GOV