It’s the holiday season and time of year when you might be thinking of making additional donations to churches or not-for-profit organizations to reduce the tax due on your return. Here are a few things to keep in mind.
After times of natural disasters, unscrupulous people often form organizations that sound like the established charities that truly help those in need. It’s important to make sure if you are donating that your money is going to the intended organization.
The IRS requires that contributions be made to a qualified organization. To verify if a charity is approved, see EO Search (note that churches are not listed). Many organizations aren’t actually registered as not-for-profits with the IRS, and donations made to these organizations are not tax deductible. Donations to individuals and political organizations/candidates are also not deductible.
If you receive a benefit from your donation, such as merchandise or other goods/services, you can only deduct the amount that exceeds the fair market value of the benefit. This is the price in which property would change hands between a willing buyer and seller.
To deduct a contribution of cash or other monetary gift, you must keep a record of the payment, whether a canceled check, payroll deduction or letter from the organization containing the name of the charity, date of the contribution and amount donated.
If your donation is $250 or more, the letter from the organization must state that no goods or services were provided in exchange for the gift. If noncash contributions are more than $500, submit form 8283 Noncash Charitable Contributions with your income tax return. Taxpayers donating an item valued at over $5,000 generally require an appraisal.
Following these guidelines will make sure your donation is tax deductible and given to the charity you intend to support.