There’s a few things you should you know before deducting donations on your taxes
If you take itemized deductions on your tax returns, making charitable cash or in-kind donations are a great way to lower your tax burden. However, not all donations are created equal, so there are some things you have to remember before you donate:
- Donations to individuals and political campaigns or organizations are not tax deductible.
- Keep great receipts. Goodwill, ARC, etc. will always give you a donation receipt. Be sure you mark down the estimated value and what you are donating on the receipt.
- If non-cash donations are over $500, you must fill out a special form to inform the IRS of these donations. No special forms are needed if your donations are under this amount.
- You can donate a car to charity. If you car sells through that charity (such as Goodwill) you can deduct the amount the car is sold for, otherwise $500 is the maxim value you can deduct.
- In some cases, miles driven for a charitble cause can be deducted from your taxes.
More Tips on Charitible Donations From the IRS
If taxpayers gave money or goods to a charity in 2016, they may be able to claim a deduction on their federal tax return. Taxpayers can use the Interactive Tax Assistant tool, Can I Deduct my Charitable Contributions?, to help determine if their charitable contributions are deductible.
Here are some important facts about charitable donations:
- Qualified Charities. Taxpayers must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible. To check the status of a charity, use the IRS Select Check tool.
- Itemize Deductions. To deduct charitable contributions, taxpayers must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with a federal tax return.
- Benefit in Return. If taxpayers get something in return for their donation, they may have to reduce their deduction. Taxpayers can only deduct the amount that exceeds the fair market value of the benefit received. Examples of benefits include merchandise, meals, tickets to events or other goods and services.
- Type of Donation. If taxpayers give property instead of cash, their deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price they would get if the property sold on the open market. If they donate used clothing and household items, those items generally must be in good condition or better. Special rules apply to cars, boats and other types of property donations.
- Noncash Charitable Contributions. File Form 8283, Noncash Charitable Contributions, for all noncash gifts totaling more than $500 for the year. Complete section-A for noncash property contributions worth $5,000 or less. Complete section-B for noncash property contributions more than $5,000 and include a qualified appraisal to the return. Taxpayers may be able to prepare and e-file their tax return for free using IRS Free File. The type of records they must keep depends on the amount and type of their donation. To learn more about what records to keep, see Publication 526, Charitable Contributions.
- Donations of $250 or More. If taxpayers donated cash or goods of $250 or more, they must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether they received any goods or services in exchange for the gift.
Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.
Additional IRS Resources:
- Charitable Contributions – Topic 506
- Publication 561, Determining the Value of Donated Property
- Publication 526, Charitable Contributions