Carol McAtee & Associates, CPAS
Good Records Key to Claiming Gifts to Charity
Keeping good records is key to qualifying for the full charitable contribution deduction allowed by law. In particular, this includes ensuring that they have received required statements for two contribution categories–each gift of at least $250 and donations of vehicles. Therefore, taxpayers planning to claim charitable donations should make sure they have the records they need before filing their 2014 tax returns.
First, to claim a charitable contribution deduction, donors must get a written acknowledgment from the charity for all contributions of $250 or more. This includes gifts of both cash and property. For donations of property, the acknowledgment must include, among other things, a description of the items contributed.
In addition, the law requires that taxpayers have all acknowledgements in hand before filing their tax return. These acknowledgments are not filed with the return but must be retained by the taxpayer along with other tax records.
Second, special reporting requirements generally apply to vehicle donations, and taxpayers wishing to claim these donations must attach any required documents to their tax return. The deduction for a car, 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.
Only donations to eligible organizations are tax-deductible so taxpayers must also be sure that any charity they are giving to is a qualified organization. Select Check, a searchable online tool available on IRS.gov, lists most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible even if they are not listed in the tool’s database.
Only taxpayers who itemize their deductions on Form 1040 Schedule A can claim gifts to charity. Thus, taxpayers who choose the standard deduction cannot deduct their charitable contributions. This includes anyone who files a short form (Form 1040A or 1040EZ).
A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2014 Form 1040, Schedule A to determine whether itemizing is better than claiming the standard deduction.
Besides Schedule A, taxpayers who give property to charity usually must attach a special form for reporting these noncash contributions. If the amount of the deduction for all noncash contributions is over $500, a properly completed Form 8283 is required.
Additionally, there are special rules that apply to charitable contributions of used clothing and household items, monetary donations, and year-end gifts. These include:
Rules for Charitable Contributions of Clothing and Household Items
- This includes furniture, furnishings, electronics, appliances and linens. Clothing and household items donated to charity generally must be in good used condition or better to be tax-deductible. Clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return.
Guidelines for Monetary Donations
- A taxpayer must have a bank record or a written statement from the charity in order to deduct any donation of money, regardless of the amount. The record must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.
- Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
Year-End Gifts
- Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2014 count for 2014, even if the credit card bill isn’t paid until 2015. Also, checks count for 2014 as long as they were mailed in 2014.
And, here’s some more valuable information on getting the best tax benefit from your charitable giving . . .
Tips on Travel While Giving to Charity
Do you plan to donate your services to charity this year? Will you travel as part of the service? If so, some travel expenses may help lower your taxes when you file your tax return next year. Here are five tax tips you should know if you travel while giving your services to charity.
1. You can’t deduct the value of your services that you give to charity, but you may be able to deduct some out-of-pocket costs that you pay to give your services–including the cost of travel. Out-of pocket costs must be:
- unreimbursed,
- directly connected with the services,
- expenses you had only because of the services you gave, and
- not personal, living or family expenses.
2. Your volunteer work must be for a qualified charity. Most groups other than churches and governments must apply to the IRS to become qualified. Ask the group about its IRS status before you donate. You can also ask us to check the group’s status. We are happy to do so.
3. Some types of travel do not qualify for a tax deduction. For example, you can’t deduct your costs if a significant part of the trip involves recreation or a vacation.
4. You can deduct your travel expenses if your work is real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.
5. Deductible travel expenses may include:
- air, rail and bus transportation,
- car expenses,
- lodging costs,
- the cost of meals, and
- taxi or other transportation costs between the airport or station and your hotel.
Please contact us if you have any questions regarding tax deductions for charitable services.
If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
