Mother Lode Tax Tips

Millions of taxpayers every year make donations to organizations in order to help make this world a better place.  Another benefit can be a deduction on your tax return. However, in order to make sure that the deduction is allowed by the IRS certain criteria must be met.

The most obvious criteria is that the orgnization you are donating to must be  “qualified.”  In other words, donating some money to your family members or friends is not considered a donation, the recipient of the donation must be IRS qualified.   Any qualified organization should be able to tell you that they are qualified, but you can check IRS publication 78 which lists most of the qualified organizations.

You can only receive the donation deduction if you can itemize (have a Schedule A) on your tax return.  The federal income tax allows itemized deductions for:

• state and local property and either income or sales taxes
• mortgage and investment interest
• charitable contributions
• medical expenses in excess of 7.5 percent of income
• casualty and theft losses in excess of 10 percent of income
• job expenses and miscellaneous expenses
  (most only allowed in excess of 2 percent of income)

That means to be able to get the donation deduction for 2009 you must have itemized deductions in total of at least:

• $11,400 for married couples filing joint returns
• $5,700 for married separate filers
• $8,350 for heads of household
• $5,700 for single filers

If you donated more than $249 to any organization than you must have a written letter from the organization to substantiate your donation.  This letter must include the date of the donation, amount and description of the donation, and if you received any goods or services in exchange.  If you did receive any goods or services than you can only deduct the amount of the donation that exceeds the fair market value of the benefit you received.

If you contributed non-cash contributions of more than $499 for the year you must file IRS Form 8283, Noncash Charitable Contribution with your return to take the full deduction.  If you make a non-cash donation of more than $5,000 you generally must have an appraisal for the donated item and fill out Section B of Form 8283.

Make sure that you actually paid the contribution in the tax year you take the deduction.  In other words, you can not make a pledge to make a contribution and take a deduction for the year when in fact the actual payment was made in the following year.  However, if the donation was made by credit card you may take the deduction on the date the transaction was completed, even though you may make the payment the next year.

Make sure you keep good records of your donations regardless of the amount.  For any cash contributions keep bank records such as a copy of the cancelled check or credit card statement as well as the written record from the charity. 

For more information on Charitable Contributions see the IRS Publication 526.  You also might be interested in IRS Publication 561, Determining the Value of Donated Property.

Tags: Contributions, Donations, IRS, Tax

This entry was posted by Richard Rogers, EA on Friday, August 28th, 2009 at 7:33 am and is filed under Deductions, For Individuals. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.