It happens every year at this time – organizations asking for year-end donations. Whatever charity your heart tells you to support, you also expect to save some tax money.
But how do you know that your donation is going to a qualified charity? Is it deductible? Here are answers to three common questions about charitable donations and their tax deductibility.
What Donations are Deductible?
Only donations to qualified charities that meet IRS non-profit status requirements are deductible. Qualified charities include humanitarian, religious, educational, scientific, and cruelty-prevention organizations. A list of qualified charities is posted in the IRS’ “Exempt Organizations Select Check” tool at http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check.
Who Can Take a Deduction?
Eligible charitable donations can only be deducted by taxpayers who itemize their deductions using IRS Schedule A. Deductible amounts could be limited if adjusted gross income exceeds annually adjusted amounts. Donations must be acknowledged in writing at or near the donation date. Donations of $250 or more must be supported by a letter from the charity stating the date and amount of the donation, reduced by the value of anything in received by the donor in return, such as the cost of a fundraising dinner.
What about Property Donations?
Donations don’t have to be monetary. Items such as clothing, household goods, vehicles, stock, or real estate, can also be donated, but they are subject to more reporting rules. In general, clothing and household items can only be deducted if they are in good usable condition. The deduction per items is based on the “thrift shop” value, unless an appraisal is obtained. Donated vehicles valued at more than $500 and donated real property and other items valued over $5,000 are subject to even more rules and documentation requirements.
The information presented here is very general. For more information, consult a qualified tax professional or do your own research with IRS Publication 526, Charitable Contributions, at http://www.irs.gov/pub/irs-pdf/p526.pdf.