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Claiming Charitable Donations on Your Tax Return

Claiming Charitable Donations on Your Tax Return

According to Uncle Sam, charitable contributions are donations or gifts to qualified organizations. However, some rules guide these donations before one can claim charitable donations.


Charitable Giving and the New Tax Law 

Before the new tax law, about 30% of taxpayers preferred the itemizing route, which includes charitable deductions. With the increase in standard deduction over the years, single filers will need over $12,000 for single filing to be worth it. There are concerns that this could eliminate the tax advantage that encourages many to give to charity. 

An approach to keep up charity giving and still get the tax benefit is known as bunching. With this, you can combine donations from various years into one year to satisfy the raised threshold for itemizing deductions. By the following year or two, the taxpayer will go with the standard deduction route.


Defining Charitable Contribution 

Properties like household items, furniture, vehicles, and cash contributions are donations. The fair market value of such a donation that you deduct begs the question: What is the fair market value?

The fair market value applies to donations of noncash properties and stock. It is the price at which the item will be available in the market. Many factors affect the calculation of the Fair Market value like sales of comparable items, selling or cost price, expert ideas, etc.


What are the Expenses that fit as Charitable Tax Deductions?

It is possible to claim a tax deduction for all expenses that you incur:

  • To cover any live-in student sponsored by an organization that qualifies

  • Out of pocket expenses incurred during your service as a volunteer for an organization that qualifies

Organizations that Qualify to Receive Charitable Contributions 

According to Uncle Sam, these firms meet the criteria to receive donations that are tax-deductible:

  • Charitable like Salvation Army, Boys and Girls Club of America

  • Education like nonprofit schools

  • Religions like mosques, temples, and churches.

  • Scientific

  • Literary

  • Local, federal, and state government – contributions intended for public purposes


Charitable organizations that are not Tax-Deductible 

Generally, Uncle Sam does not allow the deduction of donations to political groups and candidates, individuals. Also, all gifts and money offered to the following are in the same category:

  • Groups specified for personal profit 

  • Homeowners union

  • Social clubs

  • Sports club

  • Labor union

  • Civil leagues

  • Groups with the intention of lobbying for law changes

  • Civic leagues

You can deduct money for raffle tickets, dues, and fees to county clubs, etc. 

Records and Forms Essential for Claiming Charitable Donations 

Documents that you will file, alongside essential records to keep, will vary depending on what you donated – property or cash, alongside the value of all noncash gifts.


Cash Donations 

For donations by check, cash, and other monetary items, it is essential to provide written communication like a written acknowledgment from such organization, payroll deduction or bank record, etc. For written acknowledgment, make sure the following are present:

  • The organization’s name 

  • The date of such contribution

  • The amount contributed

Cash and Property Donations of $250 and Above 

For all claims of cash or properties worth $250 or more, it is compulsory to submit a written contemporaneous acknowledgment from the recipient qualifying organization. This single document must include:

  • The cash amount alongside details of the donated property

  • Whether you got any goods or service from such organization with an estimate of the value

Deduction for Noncash Items above $500

For deductions above $500 for a donation that is not cash, it is essential to attach your completed Form 8283 alongside your tax return.

Noncash Property Not Up to $5000

For noncash property that is not worth up to $5000, it is essential to complete the first section of Form 8283 and submit it with your tax form. 

Noncash Property With Value above $5000

For donated noncash items worth above $5,000, it is essential to get a qualified appraisal and fill the second section of Form 8283 alongside your tax return.