One of the favorite itemized deductions to claim on form 1040, Schedule A, is the gifts to church and charity.
Here are some of the IRS rules on the law provisions and general substantiation requirements to keep in mind.
Clothing and household items donated to charity must be in good used condition or better. Donors must get a written acknowledgment from the charity for all gifts worth $250 or more, including a description of the items donated. In practice, we find the receipt from the charity do not usually list the items in detail and certainly do not give values of each item. That means the taxpayer needs to make their own list to save with the receipt. If the clothing or household item for which a deduction of over $500 is claimed, it does not have to meet the standard above if the return includes a qualified appraisal of the item. Sometimes photographs are a good idea.
Money donations, regardless of amount, need a bank record or a written communication from the charity showing the date and amount of the contribution. Bank records include copies of canceled checks, bank or credit union statements and credit card statements that show the date, name of the charity and date of payment.
For payroll deductions, it is best to keep a pay stub or other document issued by the employer that shows the total amount given to charity and the name of the charity.
Charitable contributions are deductible in the year made. Donations charged to a credit card before the end of the year are OK, even if the credit card bill isn’t paid until the next year. Checks count as done if they are mailed before the end of the year. For large checks, it is good to mail those priority mail to prove it was mailed before the year is over.
Only contributions to qualified organizations are tax deductible. The IRS data base that lists qualified organizations does not list churches and government agencies, but they are qualified organizations.
The charitable contributions are only allowed if Schedule A of form 1040 is filed. Many taxpayers do not itemize, but claim the standard deduction instead. It is best to compute the return both ways (itemized v. standard deduction) to see which way saves the most tax. If the amounts are close and the year is not over yet, maybe you should consider paying charitable contributions (and property taxes) in the current year to get the tax savings of itemized deductions.
If a car, boat or airplane is donated, the amount of the deduction is usually limited to what the charity sells it for. Of course other documentation is to be attached to the return. That non cash contribution is reported on form 8283.
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John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.