As the end of the year draws near the time to give and share with others seems to be greater now than the rest of the year. Although it is always good to keep in mind those who are in need it also important to know the donations may benefit the donors as a deduction on their individual tax return if they keep in mind the following:
- only contributions made and paid in the year are deductible.
- donations paid with credit cards are deductible in the year the charge is made although the payment is made the following year.
- Donations must be made to qualified organizations to be deductible. Publication 78 lists most of the qualified organizations.
- Cash and fair market value of property are deductible. Great care must be exercised when determining the value of donated property.
- Donated property whose value exceeds $500 needs to be reported on form 8283 and attached the form to the tax return.
- Donated property whose value exceeds $5,000 required an appraisal and must be reported on form 8283 and attached to your tax return.
- Any cash or property donation valued at $250 or more required a written acknowledgement from the organization to substantiate the donation. A complete description must be included and if the organization provided any goods or services in exchange of the donation, the value of the goods and services must be listed on the receipt.
- Recordkeeping of the donations is a must regardless of the amount. Bank records, canceled checks, credit card statements, payroll deduction record and charity organization receipt showing its name, the date and the amount of the contribution are necessary to justify the tax deduction.
Charitable donations are a deduction if the donors itemize their deductions however this should not be the only factor to be considered when it comes to help to those in need.