Individuals and businesses making contributions to charity should keep in mind some key tax provisions that have taken effect in recent years.
To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements.
Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction.
Things to keep in mind:
- Contributions are deductible in the year made
- Only donations to qualified organizations are tax-deductible.
- For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions.
- For all donations of property, get from the charity a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property
- The deduction for a motor vehicle, 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.
- If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.
- And, as always it’s important to keep good records and receipts.
If you have any questions on how this deduction will affect your income tax, speak to your CPA who can help guide you when planning for if/when you make a donation, especially if it is one of high value.