The Internal Revenue Service, along with Christianity Today magazine, has released a list of helpful tips when it comes to claiming a charitable contribution as a tax deduction. The following are a few of those tips:
- To be deductible, a contribution must be made to a “qualified” tax exempt organization, which would include churches. Contributions made to a specific individual, political organization, or political candidate, even though such was given for a charitable cause, can not be claimed as a charitable contribution deduction.
- A person cannot claim a charitable deduction based upon the value of their time or personal services performed. Therefore, a lawyer who donates her time to do legal work for a church can’t claim the value of that service as a charitable donation to the church.
- If you get something from the charity in return for your donation, you can deduct only the amount that exceeds the fair market value of the benefit you received. For example, if you give $100 to a television ministry and receive a $25 Bible in return for the donation, you can only claim a $75 charitable contribution deduction.
- If you donate stock or other property, the value of the donation is determined at the time of the gift, regardless of what you paid for the stock or property. Assume that you paid $10,000 for a piece of property and it is now worth $50,000. If you sold the property yourself, you would owe taxes on the $40,000 gain. However, if you donated that property to the church, you get to claim a charitable contribution deduction for the entire $50,000, not just the $10,000 cost basis that you have in the property.
- Clothing and household items can be claimed as charitable donations but only if they are “in good used condition.” These items must be itemized to be deductible. Just saying “bag of used clothes – $50” is not sufficient.
- For all contributions, you can only claim a charitable deduction if you maintain a bank record or a written communication from the charitable organization that contains the name of the organization, the date of the contribution, and the amount of the contribution.
- In addition, if the contribution is $250 or more, you must obtain a written acknowledgment from the charitable organization showing the amount of the contribution, the date of the contribution, and whether the charitable organization provided any goods or services in exchange for the gift. Simply having bank records is not sufficient for gifts over $250.
- If you give more than $500 in non-cash gifts to any charity, you must attach IRS Form 8283 (Non-Cash Charitable Contributions) to your tax return. If you give more than $5,000 in non-cash gifts, an appraisal must also be attached to the IRS Form 8283.
- Churches should voluntarily provide tax receipts to donors at least once a year. Examples of receipts can be found on our web site by clicking here.
While we do not give gifts to charitable organizations or churches solely to receive a tax deduction, it is an added benefit that is provided under the tax code. Therefore, you should take advantage of the opportunity to claim every deduction that you are entitled to under the law.