Can I Deduct My Charitable Contributions?

If you are among many people who record charitable contributions as tax deductions on your income tax return, do you really know the tax rules for the tax deduction, or are you at risk at paying penalties, interest plus the additional tax if the IRS ever audits your return? Here is a summary of the IRS rules for deductible charitable contributions.

• Charitable contributions are only deductible if you itemize deductions on Form 1040, Schedule A Itemized Deductions.
• To be deductible, you must make charitable contributions to qualified organizations. Payments to individuals are never deductible.
• You can deduct only the amount that exceeds the fair market value of the benefit received if your contribution entitles you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance, or sporting event.
• For a contribution of cash, check or other monetary gift regardless of amount, you must maintain as a record of the contribution a bank record or a written communication from the qualified organization containing the name of the organization, the amount, and the date of the contribution.
• For any contribution of $250 or more, you must obtain and keep in your records a contemporaneous written acknowledgment from the qualified organization indicating the value and a description of any property contributed.
• The taxpayers hold the responsibility to prove the value of the contribution in the event of a tax examination by the IRS. A best practice at the minimum is to make an itemized list of all the items contributed and the associated estimate fair market value of each item. Keep the itemized list and the source of the pricing determination in your tax records. Your also keeping digital photos of the items contributed with the list will help your position upon IRS examination. Digital photos are especially advisable for higher value items, such as furniture. Keep separate receipts for items valued over $500.
• If you claim a deduction for a contribution of non-cash property worth more than $5,000, you will need a qualified appraisal of the non cash property. If you claim a deduction for a contribution of non cash property worth more than $500,000, you also will need to attach the qualified appraisal to your return.
• Special rules apply to donations of certain types of property such as automobiles, inventory and investments that have appreciated in value.

This information is intended to be only a summary of the recordkeeping requirements for deductions of charitable contributions. For more details see the IRS link: https://www.irs.gov/taxtopics/tc506.html  Other tax circumstances may affect your deductions. If you need assistance, visit https://map.cpa/our-services/tax-services/ and contact our office for assistance.

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