U.S. Tax Preparation Worldwide James Maertin CPA
Tax Guide, Deductions
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Charitable Donations
For detailed information, please refer to IRS Publication 526.
Qualified Charities
You can deduct your charitable contributions only if you make them to a qualified organization. Most organizations, other than churches and governments, must apply to the IRS to become a qualified organization. Qualified organizations are essentially charities, non-profit organizations and religious organizations that are organized or created in the United States or its possessions, or under the laws of the United States, any State, the District of Columbia or any possession of the United States, and organized and operated exclusively for charitable, religious, educational, scientific, or literary purposes, or for the prevention of cruelty to children or animals.
To see if an organization is qualified, go to IRS Tax Exempt Organization Search.
Most contributions to foreign charities are not deductible. There are exceptions for Canadian, Mexican and Israeli charities. To deduct charitable contributions from these three countries, you must have income from sources within those countries. A contribution to a charitable organization is deductible if and to the extent the contribution would have been treated as a charitable contribution if the organization had been created or organized under U.S. law.
Examples of Deductible Donations:
Donations by cash, check or credit card to
qualified charitable organizations.
A church, synagogue, or other religious organization; a war veterans'
organization; numerous other qualified charities like American Red Cross,
United Way, Feeding America, World Vision, American Cancer Society, Nature
Conservancy, Doctors Without Borders, etc.
Only donations made to GoFundMe
charity
campaigns are
tax-deductible and will receive tax receipts from PayPal Giving Fund.
Donations to GoFundMe
personal
campaigns are generally considered to be personal gifts and are generally not deductible.
Donation of Clothing and Household Items
Must be in
good used condition or better. Value is the fair market value at the time
of the contribution (not the original cost). For your records, you should
support your valuation with photographs, canceled checks, receipts from your
purchase of the items, or other evidence. Qualified organizations include
churches and thrift shops such as Salvation Army, Goodwill, Habitat for
Humanity, etc.
Contributions of Property.
If you contribute property to a qualified
organization, the amount of your charitable contribution is generally the fair
market value of the property at the time of the contribution.
Expenses Paid for Student Living With You.
In certain situations, you may be
able to deduct expenses related to a student (12th grade or lower) who lives
in your home under written agreement between you and a qualified
organization as part of a program of the organization to provide educational
opportunities for the student.
Out-of-Pocket Expenses in Giving Services
Although you can't deduct the value
of your time and services given to a qualified organization, you may be able
to deduct some amounts you pay in giving services to a qualified
organization.
Examples of qualified deductions:
1. Expenses you had only because of the services you gave. For example, the out-of-pocket cost of your uniform if you volunteer for the Red Cross at a hospital.
2. Unreimbursed travel expenses necessarily incurred while you are away from home performing services for a charitable organization. See https://www.irs.gov/newsroom/irs-offers-tips-on-charity-travel
3. Auto expenses (generally 14 cents a mile plus tolls, parking fees) if you used your car to give services or donate items to a qualified organization.
4. The reasonable out-of-pocket expenses you pay to allow under-privileged youth (selected by a qualified charity with goal to reduce juvenile delinquency) to attend athletic events, movies, dinner. Your own expenses are not deductible.
5. If a qualified organization selects you to attend a convention as its representative, you can deduct unreimbursed meal and lodging expenses.
6. Expenses related to being a foster parent if a qualified organization selected the individual and you don't make a profit.
Donation of Car or Boat
If your car is valued at more than
$500, the charity that receives your donation is required to send you Form
1098-C reporting the gross sale amount of your donated car.
This tax form is required to be attached to the tax return.
Giving Property That Has Decreased in Value
If you contribute property with a fair market value that is less than your basis in it, your deduction is limited to its fair market value.
Giving Property That Has Increased in Value
If you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction
Always ask for and save receipts when giving to charity!
Cash Charity:
In case of audit, the IRS requires proof of any cash contribution of $250 or more.
Non-Cash Charity:
For non-cash charitable donations in excess of $500, the following information will be reported on the tax return:
a.) Name and address of the organization(s) to which you donated the goods.
b.) Fair market value of goods donated to each charity (this is generally substantially less than the original purchase price).
c.) Description of goods donated
d.) Date(s) of contribution.
A person donating property valued at more than $5,000 must obtain a qualified written appraisal.
Note: Unless you donated newly purchased items (such as for children's Christmas charities), you will need to find the fair market value of the items that you donated (if not shown on your receipt). You should be able to make a good estimate using the Salvation Army Valuation Guide.
Examples of Nondeductible Donations:
The value of your time and services
Most contributions to foreign charitable organizations, including foreign churches
Donations made to GoFundMe Personal campaigns are generally considered to be personal gifts
A contribution to a nonqualified organization
The part of the contribution for which you receive a benefit
Your personal expenses
Appraisal fees
Contributions to specific individuals
Contributions to political organizations and candidates (state rules may vary)
Contributions from which you benefit:
If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive.
Example: At a fundraising charity, you pay $200 for one ticket which includes dinner. The dinner is valued at $75. Your deductible contribution is $125 ($200 minus $75)
Penalty
You
may be liable for a penalty if you overstate the value or adjusted basis of
contributed property.
The penalty is 20% of the amount by which you underpaid your tax because of the overstatement, if:
1. The value or adjusted basis claimed on your return is 150% or more of the correct amount, and
2. You underpaid your tax by more than $5,000 because of the overstatement.
The penalty is 40%, rather than 20%, if:
1. The value or adjusted basis claimed on your return is 200% or more of the correct amount, and
2. You underpaid your tax by more than $5,000 because of the overstatement.