Making charitable contributions is an
easy and effective way to lower your taxes. You are eligible to take a
deduction for contributions or gifts made to certain qualified organizations.
The contributions can either be in the form of money or property. You must file
Form 1040, U.S. Individual Income Tax Return, and itemize deductions on
Schedule A, Itemized Deductions, to take advantage of this deduction.
Contact your neighborhood Jackson Hewitt office for
more information or assistance.
Contributions in General
charitable contribution is a donation or gift to, or for use by, a qualified
organization. It is voluntary and is made without getting, or expecting to get,
anything of equal value in return. Deductible charitable contributions include
money or property given to qualified organizations, your out-of-pocket expenses
when you serve as a volunteer for a qualified organization, and certain
expenses you pay for a student living with you who is sponsored by a qualified
Deductible charitable contributions do not include the
following, even if given to a qualified organization:
- Cost of
raffle, bingo, or lottery tickets
- Dues, fees, or bills paid to country
clubs, lodges, fraternal orders, or similar organizations
- Value of your time or services
- Value of blood given to a blood
- Money or goods given directly to an individual
You can deduct
contributions made to a qualified organization. To be considered qualified,
most organizations (other than churches) must apply to the IRS. Local
fundraisers for community members in need of assistance will not be considered
qualified organizations unless they have been approved as such by the IRS.
Examples of some qualified charitable organizations include the
- Churches, synagogues, temples, mosques, and other
- Most nonprofit organizations, such as
Salvation Army, Red Cross, CARE, Goodwill Industries, United Way, Boys and
Girls Clubs of America.
- Nonprofit hospitals and medical research
- Nonprofit schools
- Most nonprofit, educational
organizations such as Future Business Leaders of America, 4-H Club, and Junior
- Nonprofit volunteer fire departments
- Public parks
and recreation facilities
- War veterans' groups such as Disabled
American Veterans and Purple Heart
- Federal, state, and local
governments if your contribution is solely for public purposes, such as a gift
to reduce the public debt
Some examples of non-qualified
- Homeowners' associations
- Political groups
or candidates for public office
- Organizations whose purpose is to lobby
for law changes
- Organizations run for personal
- Civic leagues, social clubs and sports clubs
- Chambers of commerce
- Foreign organizations except
certain Canadian, Israeli, and Mexican charities
Usually, you may deduct charitable contributions only in
the year they were actually made. A check that you mail is considered delivered
on the date you mailed it. A contribution charged on a credit card is
deductible in the year you make the charge. The amount of your deduction may be
limited depending on the type of property given and the type of organization to
which it is given. Some contributions that you are not able to deduct in the
current year because of adjusted gross income limits may be carried over to
Item (Non-cash) Donations
Extra tax deductions
may be as close as your closet. If you donated clothing, toys, furniture, or
other household items to charity, you are allowed to deduct the fair market
value of your donated items. However, no deduction is allowed for these items
unless they are in at least good used condition. The IRS does not provide a
guide to determine the fair market value suggesting, instead, taxpayers survey
thrift and consignment stores for similar items to provide an indication of the
item's fair market value.
Generally, the deduction for property
contributed is equal to the fair market value of the property at the time of
the contribution. Different rules may apply if the value of the property has
increased or for vehicle donations.
561, Determining the Value of Donated Property, provides general IRS
guidelines on noncash donations.
You can verify the organizations
eligibility before you make a donation by going to IRS.gov and checking the Exempt
Organizations Select Check database maintained by the IRS.
If you donate a qualified vehicle valued at more than $500,
you will not be allowed to take a charitable deduction unless you get a written
acknowledgement of the contribution from the charitable organization (usually
within 30 days) and include the acknowledgement with your tax return. The
amount of your deduction is limited by the organization's use of the vehicle.
If the charitable organization sells the donated vehicle without having
significantly used the vehicle for charitable purposes, generally your
charitable deduction cannot be greater than the amount the organization
received from the sale of the vehicle. If the organization uses the vehicle for
charitable purposes, you should be able to deduct the fair market value of the
vehicle immediately preceding your donation. The organization should issue a
Form 1098-C to provide you with the required information. For this purpose,
qualified vehicles include motor vehicles, boats, and aircraft.
Publication 4303, A Donor's Guide to Car Donations, provides
general IRS guidelines on car donations.
you have an American or foreign exchange student living in your home, you may
be able to deduct up to $50 per month as a charitable deduction on Schedule A.
You must have a written agreement from a qualified organization that
administers the student program. The student cannot be your dependent or a
relative, and must be a full-time student at the high school level or
Expenses that you may be able to deduct include the cost of
books, tuition, food, clothing, transportation, medical and dental care,
entertainment and other amounts you actually spend for the well-being of the
student. They do not include general household expenses, such as rent, mortgage
payments, taxes, insurance, repairs or the fair market value of lodging.
If you are compensated or reimbursed for any part of the costs of having a
student living with you, you cannot deduct any of your costs unless you are
reimbursed for only an extraordinary or a one-time item, such as a hospital
bill. In this case, you can deduct the expenses for which you were not
You cannot deduct the costs of a foreign student living in
your home under a mutual exchange program through which your child will live
with a family in a foreign country.
can deduct the out-of-pocket expenses incurred while serving as a volunteer for
a qualified organization. This includes the cost of uniforms not suitable for
everyday use that you must wear when volunteering, travel expenses where no
significant element of personal pleasure is involved, and vehicle expenses for
which you can deduct out-of-pocket expenses, such as the cost of gas and oil,
or 14 cents per mile. The value of your time or services cannot be deducted.
Partially Deductible Contributions
If you attended a charity
benefit or event, you may be able to deduct the dollar amount that is more than
the fair market value of the event. For example, if you attended a dinner
fundraiser for a qualified non-profit organization for $65 a ticket and the
regular price of the meal is $10, your contribution amount would be $55.
If you receive goods or services in exchange for your contribution, you can
deduct only the amount of the payment that is more than the value of the goods
or services received. For example, if you spent $20 on a school youth group's movie ticket sales and it would have cost $10 to purchase the food items from
the store, then you would be able to deduct $10.
If the payment is more
than $75, the qualified organization must give you a written statement that
indicates the value of the goods or services received.
Direct Contributions from an IRA
If you are 70 and a half or older, you can make a direct transfer of up to $100,000 from your IRA to any qualified charity. These direct transfers, or Qualified Charitable Distributions (QCD), are considered part or all of your minimum required distributions (MRD) for the year. QCDs are not taxable and you are not allowed to claim them as charitable deductions on your tax return. Any distributions that are not QCDs are subject to the normal rules for IRA distributions.
The IRS requires you to keep a written acknowledgement from the
charitable organization for any single cash or property contribution of $250 or
more. You are also required to keep records and receipts for all contributions
regardless of the amount or value.
For the contributions of less than
$250, you should have a canceled check, receipt from the organization, or other
reliable written documentation of the contribution. For all cash contributions,
you must have either a bank record or a receipt from the organization. For
contributions of $250 or more, written acknowledgement of the contribution from
the qualified organization is required to claim the deduction. For property
with a fair market value of more than $500, you must include a written
description of the donated property with your tax return.
contributions of property, you should have a receipt indicating the name of the
charitable organization, date and location of the contribution and description
of the property. You should also have written documentation that includes, in
addition to the information on the receipt, the address of the organization,
the fair market value of the property at the time of the contribution, and how
the fair market value was determined. If you have total property contributions
of more than $500, you will need to complete Form 8283, Non-cash Charitable
Contributions , and attach it to your return. If you donated property with a
fair market value exceeding $5,000, you must get a written appraisal by a
qualified appraiser and include the appraisal with your tax return.
contributions of qualified vehicles (such as motor vehicles, boats, and
aircraft) with a claimed value of more than $500, the charitable organization
must provide you with a separate written acknowledgement of the contribution
(usually within 30 days). Form 1098-C includes the necessary information. The
acknowledgement must include the following necessary information:
- Your name and identification number (usually your Social Security
- A number that identifies the vehicle, such as the vehicle's
VIN (vehicle identification number)
If the organization sells
the donated vehicle without having made material modifications to it or without
having significantly used the vehicle for charitable purposes you will need:
- A certification that the vehicle was sold in an arm's-length
transaction between unrelated parties
- The gross proceeds received by
the charity from the sale
- A statement that the deductible amount for
the donated vehicle may not exceed the gross proceeds
organization keeps the donated vehicle for its use:you will need:
certification stating how the charity intends to use the donated vehicle, for
how long, and whether material improvements will be made to the vehicle
- A certification that the vehicle will not be exchanged before the period of
intended usage has ended or the intended improvements have been made