It's that time of year again...donation season. On top of the crazy weather, crazy people, and other things going on most of us are about to be, if we haven't already been, inundated with kids asking for money, goods, or services.
I'm gonna say that the bulk of these groups are good for the community, and your money is well spent being invested here, but there are a few things you need to know before you hand out your hard earned money.
If your goal is a legitimate tax deduction, then you must be giving to a qualified organization- 501(c)3, church, or other qualified organization. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization. IRS.gov has a tool for people to quickly and easily check the status of charitable organizations. **You cannot deduct contributions made to specific individuals, political organizations, and candidates.
To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.
If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.
Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.
Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction record or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the recordkeeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.
To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.
Any other donations are good for your soul, but can't be deducted on your tax return.
A few pointers:
- Raffle tickets, bingo, & lottery tickets are NOT tax deductible, no matter what organization they benefit.
- If you receive something in return, you can ONLY deduct the amount OVER fair market value that you paid.
For example- Your child has a fundraiser at school and you win a hunt with a bid of $2500. The hunt is valued at $1500, so what you would be legally allowed to take is the difference in the two (2500-1500= $1000). If the hunt was valued at $3000, the deduction would be zero, since you paid less than fair market value for the prize.
- Chambers of Commerce, Country Clubs, Civic League, Labor Union, Social or Sports Club, etc... are non-qualified organizations and donations to these organizations cannot be deducted from your taxes as charitable contributions.
- Donations to a Volunteer Fire Dept. may be deductible if they are made exclusively for public purposes.
There are many of us who have more time on our hands than money, know there are some deductions available for you also!
If you volunteer for a qualified organization, the following questions and answers may apply to you.
I volunteer 6 hours a week in the office of a qualified organization. The receptionist is paid $10 an hour for the same work. Can I deduct $60 a week for my time?
No, you can't deduct the value of your time or services.
The office is 30 miles from my home. Can I deduct any of my car expenses for these trips?
Yes, you can deduct the costs of gas and oil that are directly related to getting to and from the place where you volunteer. If you don't want to figure your actual costs, you can deduct 14 cents for each mile.
I volunteer as a Red Cross nurse's aide at a hospital. Can I deduct the cost of the uniforms I must wear?
Yes, you can deduct the cost of buying and cleaning your uniforms if the hospital is a qualified organization, the uniforms aren't suitable for everyday use, and you must wear them when volunteering.
I pay a babysitter to watch my children while I volunteer for a qualified organization. Can I deduct these costs?
No, you can't deduct payments for childcare expenses as a charitable contribution, even if you would be unable to volunteer without childcare.
Although you can't deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. The amounts must be:
Directly connected with the services,
Expenses you had only because of the services you gave, and
Not personal, living, or family expenses.
Of course, there will always be those who take advantage of people's generosity.
The Internal Revenue Service has issued a warning about possible fake charity scams emerging due to Hurricane Harvey and encouraged taxpayers to seek out recognized charitable groups for their donations.
While there has been an enormous wave of support across the country for the victims of Hurricane Harvey, people should be aware of criminals who look to take advantage of this generosity by impersonating charities to get money or private information from well-meaning taxpayers. Such fraudulent schemes may involve contact by telephone, social media, e-mail or in-person solicitations.
Criminals often send emails that steer recipients to bogus websites that appear to be affiliated with legitimate charitable causes. These sites frequently mimic the sites of, or use names similar to, legitimate charities, or claim to be affiliated with legitimate charities in order to persuade people to send money or provide personal financial information that can be used to steal identities or financial resources.
The IRS cautions people wishing to make disaster-related charitable donations to avoid scam artists by following these tips:
Be sure to donate to recognized charities.
Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations.
Don’t give out personal financial information — such as Social Security numbers or credit card and bank account numbers and passwords — to anyone who solicits a contribution. Scam artists may use this information to steal a donor’s identity and money.
Never give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the donation.
Consult IRS Publication 526, Charitable Contributions, available on IRS.gov. This free booklet describes the tax rules that apply to making legitimate tax-deductible donations. Among other things, it also provides complete details on what records to keep.
Plain & simple, you should be generous not only for the tax deduction, but because it makes you feel good and because it does good for your community. If you are in the tax bracket that you need the deduction, be smart about where you give. There are plenty of schools that have PTO's in place as 501(c)3 organizations, there are small organizations in your town that can use every penny you're willing to give them to make a difference in your community, don't just think about the big organizations (Red Cross, American Cancer Society, etc...). Your smaller organizations may not give you the fancy tokens of appreciation that the big organizations will, but they will utilize your money better and make sure that it affects people near you!