Posted by The TaxAdvocate Group, LLC

Rules and Guidelines for Deducting Charitable Deductions

Rules and Guidelines for Deducting Charitable Deductions

One way to reduce your taxable income and lower your tax bill is to donate to qualified charities. This involves itemizing deduction to qualify to claim it. The only condition where this is a good idea is if the entire itemized deduction is more than the standard deduction amount that will come to you according to your filing status.

How to Claim a Deduction

Schedule A has the portion where you can claim a tax deduction. The entire amount you have in Schedule A goes to the ninth line of Form 1040. Instead of claiming the standard deduction, you can go for the whole schedule sum A deductions.

The reason is not to claim charitable donations alone. All itemized deductions you are qualified for is included. Some other deductions you can itemize are dental and medical expenses you paid for you or other dependents.

Rules for Claiming the Charitable Contribution Deduction income 

There are many rules from the IRS for claiming charitable contribution deductions. 

  1. Cash or property must indeed be donated. You cannot deduct a pledge or promise except you pay it.

  2. The receiving organization must be tax-exempt qualified. Some charities will have 501(c)(3) tax-exempt status. Other organizations, especially religious organizations, are not eligible for 501(c)(3). They already qualify as charities and some trusts and non-profit volunteer companies.

  3. There are records you must have. You need your saving canceled checks, letters from the organization acknowledging the donation and appraisal confirming the value of whatever was donated.


Non-Cash Contributions

You should be able to develop the market value of the property or goods you are giving out. This has to do with boats and other forms of vehicles, including airplanes. The charity must also acknowledge the type of gift by writing.

For gifts worth more than $500, you need Form 8283, which must be forwarded with the tax return.

Donating Non-Cash Items: Tips

In donating non-cash items, here are essential tips to keep in mind

  • You should have a list describing the things you are giving out. These details will appear in Form 8283

  • Judging by the condition of each item, estimate the value. For items in terrific working condition, the IRS will allow you to make a deduction. This means that your old couch cannot make you qualify for a deduction. When you want to value the property, you will assess the current condition without any new part. The IRS has a valuation guideline in the Goodwill or Salvation army for items like household appliances and clothing to value them.

  • Foods and groceries also qualify for deductions. Hence, donating them to a charity allows you to deduct the cost. The only clause is having an acknowledgment of the donation written and signed. You, however, need the receipt of the item as proof.

  • Pictures of your donation is a terrific idea. It is a good idea, especially for people donating many items. While technically this is not a requirement, it will come in handy if you are audited.

  • There is the opportunity to prepare your receipts as tax-deductible donations. Just make sure it is signed, mainly if you write it ahead of the donation. This will help you have a correct receipt that has all the required information.

  • For people donating items over $5000, you need a written appraisal alongside completed section B of Form 8283.

What is not allowed on the Charitable Contribution Deduction 

You can deduct contributions as much as 30% or 60% of your adjusted gross income (AGI). This is a factor of the property of your tax-exempt status of the charity you give.

The excess can be carried over to subsequent years if your gift is over the limit, You can carry over excess contributions for five years. 

Before, if you have an excessively high AGI, it could affect your deduction. The TCJA, however, made changes to this rule. 

What's Not Deductible

Here are some classes of contributions you cannot deduct:

  • Donations to political campaigns, parties, and other action committees.

  • The gift you gave single people.

  • Gifts to business associations, labor unions, and the chamber of commerce.

  • Contributions to foreign governments

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