Year end is typically not the best time for year-end tax planning. Things can get hectic during the final weeks of the year. But year end and the holiday season often prompt people to make this the time of year when charitable gifts and tax planning often converge. If you plan to donate a charitable gift and want to claim a tax deduction, here are six tips from the Internal Revenue Service (IRS) you should know before you give. (And remember: As we always note, when it comes to taxes, always consult your trusted advisor because everyone’s tax situation is unique.)
1. Give to qualified charities.
IRS online resource for researching charities
- Use the IRS Select Check tool to see if the group you give to is qualified.
- Even if Select Check does not list them in its database, you can deduct gifts to churches, synagogues, temples, mosques and government agencies.
Online tools from not-for-profit agencies for researching charities
- Wise Giving Alliance (via: Better Business Bureau)
2. Keep a record of all cash gifts.
Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction.
- You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return.
- This is true regardless of the amount of the gift.
- The statement must show the name of the charity and the date and amount of the contribution.
- Bank records include canceled checks, or bank, credit union and credit card statements.
- If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer.
- It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.
3. Gifts of household goods must be in good condition.
Household items include furniture, furnishings, electronics, appliances and linens.
- These items must be in at least good-used condition to claim on your taxes.
- A deduction claimed of more than $500 does not have to meet this standard if you include a qualified appraisal of the item with your tax return.
4. Get an acknowledgement from the charity.
- You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more.
- Additional rules apply to the statement for gifts of that amount.
- The statement is in addition to the records required for deducting cash gifts.
- One statement with all of the required information may meet both requirements.
5. Make year-end monetary gifts before January 1.
- If you charge your gift to a credit card before the end of the year it will count for 2015. This is true even if you don’t pay the credit card bill until 2016.
- A check will count for 2015 as long as you mail it in 2015.
6. Special rules for non-cash gifts over $500:
Special rules apply if you give a car, boat or airplane to charity.
- If you claim a deduction of more than $500 for a noncash contribution, you must file another form with your tax return.
- Use Form 8283, Noncash Charitable Contributions, to report these gifts.
Need more help? Check out these additional IRS Resources
- Tax Topic 506, Charitable Contributions
- Publication 526, Charitable Contributions.
- Publication 561, Determining the Value of Donated Property
- Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes