The upcoming holiday seasons are a time for giving. So now seems like a good time to review the rules for deducting donations.
You can deduct as a charitable Contribution on Schedule A (if you are able to itemize):
* Cash or property (appliances, books, clothing, computer hardware and software, electronics, furniture, household items, toys, videos, etc.) contributed to a qualified tax -exempt organization created or organized in the US or any possession under the laws of the United States or any state or possession.
* Out-of-pocket expenses connected with donations or volunteer service to a qualifying Church or Charity, such as the cost of the ingredients of homemade cookies or a cake donated to a church bake sale, or the cost and laundering of uniforms for a scoutmaster.
* Travel and transportation expenses incurred while performing a volunteer service for a qualifying church or charity. If you use your car you can deduct 14 cents per mile plus any parking fees and tolls.
* The portion of the cost of a ticket to a fund-raising event that exceeds of the “fair market value” of goods or services received. If you buy a ticket for a fund-raising dinner for $100 and the cost of the dinner is $35 you can deduct $65.
* Rebates earned on credit card purchases that the cardholder elects to have the credit card company give to a qualified charity. These rebates are not taxable income to the cardholder.
The following items are notdeductible:
* Contributions made directly to an individual or family, regardless of the recipient’s financial or health status.
* Contributions to an organization created to lobby for changes to federal, state or local laws.
* Contributions to political organizations or election campaigns.
* The value of blood donated.
* The value of your time to perform volunteer services.
* Contributions to non-profit homeowner or condo associations, or social or sports clubs.
* Raffle tickets. These can, however, be deducted as gambling losses if you have any gambling winnings to report.
* The rental value of the use of a vacation property donated to charity for a “vacation auction ”.
If you plan to make donations to a church or charity AND claim a charitable itemized deduction on your 2017 Schedule A you MUST have -
(1) Documentation of your contribution.
(2) A contemporaneous written acknowledgment from the church or charity for any single donation of $250 or more.
Acceptable documentation includes-
* a cancelled check,
* a bank record (i.e. a copy of the front of the check included on your monthly bank statement),
* an entry on a bank or credit card statement indicating a credit or debit card charge,
* a written acknowledge from the church or charity, or
* if you give to the United Way or other charity via payroll deduction a pay stub, Form W-2, or other employer furnished document that sets forth the amount withheld for payment to the charity, along with a pledge card prepared by or at the direction of the charity, will be appropriate documentation.
The written acknowledgement from a church or charity must include the organization’s name and address, the date and amount of the contribution, and indicate whether you were provided any goods or services (other than “intangible religious benefits”) in exchange for the donation. To be able to claim a deduction for the full amount of your contribution the acknowledgement must state - “No goods or services were provided in exchange for the donation”.
To be “contemporaneous” the acknowledgement must be received from the organization before the earlier of the date the original tax return is filed or the extended due date of the tax return.
You can claim a deduction for the “fair market value” of new or used items donated to a qualifying church or charity. According to the IRS, fair market value is the price a “willing, knowledgeable buyer would pay a willing, knowledgeable seller when neither has to buy or sell.” If you contribute new food, toys, clothing, or other items you can deduct the actual cost of the items donated.
You are responsible for determining the fair market value of the items you are donating. The charity to which you make the donation is notrequired to provide you with a value. The same rule discussed above applies if the total value of “non-cash” items donated to a charity in a single day is more than $250.
Whenever you contribute used items you should always make and keep a detailed listing of what you have donated with the condition and value of each set of items (i.e. 6 pairs of men’s pants, good condition, $60, 5 pairs of men’s shoes, good condition, $75). You cannot deduct the contribution of a used item of clothing or household item unless the item is in at least "good" condition. Donations of clothing and household items with a minimal monetary value, such as used socks or underwear, are also not deductible.
Special rules also apply if you donate a car or marketable securities to a church or charity. I will discuss these rules in a subsequent post.
If you have any questions on charitable giving I suggest your consult your, or a, tax professional.