Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

Itemized deductions: charitable contributions

charitable contributions, itemized deductions, donations, tax, taxes, deductions, charityItemized deductions… you probably think you don’t need to read this because it is something that has been around and hardly ever changes. You probably think you know what is and is not deductible at this point, correct? It is all too often that some little things like itemized deductions get pushed aside, because everyone thinks they know all there is to know about them. Sometimes people get so caught up in the complexity of the tax code, they miss researching things like the special rules in something as basic as itemized deductions. For the sake of keeping within blogging constraints, I will break this into two blogs and only focus on charitable contributions and taxes as they relate to itemized deductions, because this is where I see people accidentally falter the most.

Charitable Contributions

Document, document, document! I can’t stress this enough. In order to deduct contributions of $250 or more, you must have written acknowledgement of the contribution from the donee. The acknowledgement must contain the following items:

  1. Amount of cash and a description of any property other than cash received.
  2. Whether goods or services were provided in consideration for any property received. I can’t say one is more important than the other, but this one is definitely critical. The IRS has started disallowing gifts without this disclaimer – so if nothing else, make sure this is on there.
  3. A description and good faith estimate of the value of any goods and services received.

Other items to consider. Form 8283 must be filed for noncash charitable contributions if $500 or more are made. If the donated property is worth more than $5,000, a written appraisal will be required. It is not required to be attached to the tax return unless it is art valued at $20,000 or more, but it doesn’t hurt to attach it anyway.

Tax planning tip. AZ will give you a credit instead of a deduction for some charitable contributions, allowing you to deduct on your Federal return and then take the dollar for dollar credit on your State return. One of the few areas the taxpayer actually comes out ahead. For more information on AZ charities and limitations visit AZDOR.gov.

Just because you believe your good deed is a charitable contribution doesn’t mean the IRS does, so please consult your tax advisor for specific detail, questions or concerns. And remember to check back for tomorrow’s blog on taxes as they relate to itemized deductions.

Chris Morrison CPA