Are you planning on making charitable donations before the end of the year? The IRS reminds us that you must itemize deductions on your tax return to claim a deduction for these gifts. In addition, the following five tips can help make those year-end charitable gifts count.
Tip #1 – Give to a Qualified Charity. Only gifts to a “qualified charity” are deductible on your income tax return. The IRS offers a handy website, the Select Check tool, to determine whether your favorite organizations are qualified. You can also deduct donations made to churches, synagogues, temples, mosques, and government agencies even if they are not listed in the Select Check database.
Tip #2 – Give Some Cash. Gifts of money can be made by check, electronic funds transfer, credit card, or payroll deduction. In order to be able to deduct a monetary gift on your tax return, you must have a bank record (cancelled check, bank statement, credit card statement) or written document from the charity (listing the organization’s name and date and amount given), regardless of the dollar amount donated. For payroll deductions, keep your pay stub(s), W-2, or other document from your employer which shows the total amount withheld along with the pledge card showing the name of the charity.
Tip#3 – Give Some Stuff. You can take a tax deduction by giving away your gently used stuff, including household items (furniture, furnishings, electronics, appliances, linens) and clothing (shirts, blouses, pants, skirts, shorts, shoes). If possible, get a receipt from the charity which includes the organization’s name, date of the contribution, and a detailed description of your donated items. If you leave your stuff at an unattended drop site, make a written record of the donation.
Tip #4 – Give Before the End of the Year. Donations are deductible on your tax return in the year they are made. Gift checks count on your 2015 income tax return as long as they are postmarked in 2015 and credit card donations charged before the end of 2015 still count this year even if you do not pay the bill until 2016.
Tip #5 – Keep Good Records. Always keep accurate records of charitable gifts you make – list the date of the contribution, a detailed description of the donation, the name and address of the organization, the fair market value of the property at the time of the donation, and the method used to determine the value. You must obtain an acknowledgment from the organization if a donation (either cash or stuff) is valued at $250 or more. If the donation consists of an automobile, boat or airplane, special rules apply which can be found on the IRS website.
Have Questions About Deducting Charitable Gifts?
If you have questions about making deductible charitable donations, please call our office at 480-776-6055 to arrange for a convenient time for us to speak!
Whitney Sorrell is a lawyer, CPA, and former IRS Revenue Agent and senior partner of Sorrell Law Firm, PLC, in Scottsdale, AZ. Mr. Sorrell’s law practice focuses on business organizations and federal tax planning, IRS dispute resolution, asset protection planning for small business owners, and estate planning for nigh net worth individuals.