Now that the holiday season is here, Americans are in the spirit of giving back through charitable causes and philanthropy. Donating time, money and household items to charitable organizations is a productive way to give back to the community while also receiving a break on taxes.
In order to assist clients in their charitable endeavors, it is important to relay important information on tax deductions to keep them informed and educated during the busy season. Make sure to double check which charitable acts are deductible, and keep a detailed list of gifts throughout the year in order to maximize the deduction. The IRS provides a list of charitable organizations that qualify for tax deductions on their website.
The most prevalent charitable donation is cash, which is very easy to value provided that the appropriate documents are kept on file. For example, it is only possible to deduct a cash donation if an organized bank record that displays the name of the charity is provided, along with the date of the donation and the amount given.
It is more difficult to gauge the value of non-cash donations such as clothing, collectibles and furniture; however, it is imperative to carefully estimate the value of each item. These contributions, particularly larger ticket items such as cars and boats, are stringently regulated and require proper documentation and validation. Keeping a detailed list of all transactions helps to later identify items on the tax return.
When donating non-cash goods to charity, make sure to get a receipt upon donation that declares the value. Additionally, if the deduction for the noncash yearly contributions is more than $500, the IRS Form 8283 must be attached.
For further information on charitable giving tax deductions and specific rules, forms and procedures, visit the IRS’s website here. It is also always appropriate to remind clients to seek professional tax advice prior to any type of giving.