Phoenix CPA | Charitable Contributions
The IRS recently issued a news release reminding taxpayers of the rules regarding the tax laws and documentation requirements for charitable contributions.
For monetary (cash, check or credit card) donations, the rules are pretty straightforward. Taxpayers must have a bank record or written communication from the charity that shows the name of the charity, the date the donation was made, and the amount of the donation. Bank records can be a cancelled check, bank statement, or credit card statement. Donations made in cash are not deductible without the receipt from the charity. Contributions charged to a credit card a deductible the year they are charged, not when the credit card bill is paid. Donations made by check are deductible in the year the check is mailed, not when the check is cashed.
For donations made via payroll deductions, taxpayers should keep a copy of the pay stub showing the total amount withheld along with the pledge card showing the name of the charity the payroll deductions went to.
Contributions made of clothing and household items must be donated in good used condition or better to be eligible for a deduction. For taxpayers claiming a deduction greater than $500 does not have to meet that standard so long as the taxpayer included a certified appraisal of the item with their tax return. Taxpayers must receive a written acknowledgement from the charity for all donations worth $250 or more that includes the name of the charity, date of the donation, and a description of the item donated. It is our advice that all taxpayers keep a receipt of every donation regardless of amount. It is also a good idea to take pictures of all items donated to substantiate the donation should you be audited and your charitable contributions get called into question. Taxpayers should also make a list of every item donated prior to donating. The IRS has disallowed donations due to lack of detail. Using non-specific descriptions like “5 bags clothing – $500” will not stand up in an IRS audit.
The charitable donation for a car, boat or airplane to a qualifying charity is generally limited to the proceeds received from the sale of the item. You must get a form 1098-C from the organization and include it with your tax return.
Only donations to qualifying US organizations are tax deductible. Donations to individuals are not tax deductible. For more detail on charitable contributions feel free to visit http://www.irs.gov/publications/p526/index.html or contact us at Dusseau & Makris, PC, your Phoenix CPA.