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Taxes and
Charitable Giving |
The tax consequences of charitable
gifts
These days, charities need your support more than ever. As you lend a helping hand,
keep the following tax facts in mind.
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If you itemize, you may deduct cash contributions to qualified charities, as well as
the fair market value of donated property.
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Contributions to religious institutions and large, national charities usually qualify
for tax deductibility, while contributions to individuals don't. If you have any doubts,
call the IRS and ask if your charity is on the list of qualified tax-exempt
organizations.
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When you donate brand-new merchandise or stocks and bonds that are publicly traded,
it's relatively easy to determine market value. But what's the value of used clothing,
furniture, or appliances? According to the IRS, you may deduct only the amount that
someone would pay for such items in a thrift shop.
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The value of your charitable services is not deductible, but you can deduct
out-of-pocket and incidental expenses. Example: You drive to a charity dinner,
help out in the kitchen, and donate your favorite casserole. You can deduct the cost of
the food and your charitable mileage, but not the value of your time.
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Instead of contributing cash, consider donating stock, mutual funds, artwork, or
similar items that have increased in value. You may deduct the full market value of the
property, and you'll avoid paying tax on the built-in capital gain.
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With securities that have decreased in value, it's better to sell the
securities first and donate the proceeds. That way, you can deduct both
your charitable contribution and your capital loss on the sale.
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If you plan to make a large contribution to charity, seek tax advice
before rather
than after making the gift in order to maximize your tax benefits.
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Good
record-keeping is required
If you plan to claim a tax deduction for
charitable contributions, you need documentation to support your gift. Here are the IRS
requirements:
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If your donation is less than $250, your canceled check is adequate substantiation.
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If you give $250 or more in a single contribution, you must obtain a written receipt
or acknowledgment from the charity. The receipt must include the date and amount of the
contribution, and must state whether you received any goods or services in return. If you
did, it must describe them and give the estimated value of what you received. You must be
able to produce such receipts if requested by the IRS, or your deduction will be denied.
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If you contribute property with a value above $500, your personal records must also
include details of how and when you acquired the property and your cost basis in the
property.
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If you donate an item or a group of similar items worth more than $5,000, all of the
previous requirements apply, but you must also obtain a qualified appraisal. There are
special exceptions for publicly traded stock and, in some cases, for nonpublic stock.
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If you receive anything of value in return for your donation (“quid pro quo”
contributions), your deduction is limited to the difference between what you donate and
what you receive.
For all quid pro quo donations over $75, the charity must provide you with a written
disclosure of the value of the goods or services provided and must indicate that the
deduction is limited to the difference between the donation and the value stated.
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If you have questions or would like details about taxes and charitable giving, contact
my office via phone or email.
I'm here to help. |
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| © This material is copyrighted |
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KATHLEEN R
"BILLIE" LOVETT
CERTIFIED PUBLIC ACCOUNTANT
P. O. BOX 642
REEDSVILLE, WV 26547
PHONE: 304-864-6618
FAX: 304-864-3744
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