December has arrived and thanks to the holiday spirit (and the impending end-of-year tax deadline), December is the month when you are more likely to reach out to your favorite charity and make a donation. Whether you are looking to spread some goodwill this holiday time or to be more charitable in general, be sure to consider the following when making your charitable donations.
- Contributions are deductible in the year made.
- Cash contributions:
- Donations charged to a credit card before the end of the year count for 2015 even if the credit card bill isn’t paid until 2016. Checks count for 2015 as long as they are mailed before the end of the year.
- For donations made by payroll deduction, be sure to retain a pay stub, a Form W-2 wage statement, or other document furnished by your employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
- To deduct any charitable donation of money, regardless of the amount, you must have a bank record or a written acknowledgement from the charity showing the name of the charity, the date, and the amount of the donation. Bank records include cancelled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date and the amount paid. Credit card statements should show the name of the charity, the date, the transaction posting date, and the amount of the donation.
o For donations of $250 or more you must have an acknowledgement from the charity for each deductible donation (either money or property).
- Non-cash contributions:
- For all donations of property, including clothing and household items, if possible, you should get a receipt from the charity that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If you leave your donation at an unattended drop site or are unable to obtain a detailed receipt from the charity, keep a written record of the donation that includes this information as well as the fair market value of the property at the time of the donation, and the method used to determine the value. Note that additional rules apply for a contribution of $250 or more.
- To be deductible, clothing and household items donated to charity must be in good used condition or better. A clothing or household item (e.g., furniture, furnishings, electronics, appliances, and linens) for which you claim a deduction of over $500 does not have to meet this standard if you include a qualified appraisal of the item with your tax return. You must get a written acknowledgment from the charity for all gifts worth $250 or more, that includes, among other things, a description of the items contributed.
- The deduction for a car, boat or airplane donated to a charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value exceeds $500. Form 1098-C, or a similar statement, must be provided to you by the organization and attached to your tax return.
- If the amount of your deduction for all non-cash donations exceeds $500, a properly completed Form 8283 must be submitted with your tax return.
- Only donations to qualified organizations are tax-deductible. The IRS maintains a searchable online database listing most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques, and government agencies are eligible to receive deductible donations, even though they often are not listed in the database. You can also research a charity on GuideStar.org to be sure the charity has been granted a 501(c)(3) charitable designation by the Internal Revenue Service.
- For individuals, you must be able to itemize your deductions on Form 1040, Schedule A to claim a deduction for charitable contributions.
- For the rules on donating artwork, check out this Henry & Horne blog.
By Pamela Wheeler, EA