In order to deduct charitable contributions on your personal return, you must adhere to the following guidelines:
- Charitable contributions are deductible only if you take itemized deductions (vs. the standard deduction) on your tax return.
- In order to be deductible, contributions must be made to qualified organizations. Gifts to an individual or a foreign organization are generally not deductible.
- Generally, you cannot deduct more than 50% of your AGI but other limitations apply in some cases. There are deductibility status codes on the IRS' website to help you identify these limitations. Also, if your charitable contributions are over 50% of your AGI in the current year, the remainder may be carried forward for five years.
- To deduct a charitable donation of money in any amount, you must have a bank record or a written document from the charity. These records should include the name of the charity, the date and the amount paid.
- To deduct a donation of clothing or household items, they generally must be in good used condition or better.
- If a contribution entitles you to merchandise, goods or services or admission to an event, you can deduct only the amount that exceeds the fair market value of the benefit you received.
- For a gift of $250 or more, you must obtain and keep in your records a receipt from the organization.
- For a non-cash contribution of $500 or more, Form 8283 must be completed and attached to your return. This form requires the date the property was acquired and how it was acquired, a description of the property, cost of the property, the fair market value at the time of contribution and how the fair market value was determined.
- Contributions are deductible in the year made. Donations charged to a credit card by December 31 count for 2014, even if the bill isn't paid until 2015. Same goes for checks, as long as they are postmarked by December 31.
According to Charity Navigator, approximately 40% of charitable giving takes place from Thanksgiving to New Year's Eve, which makes it a great time to review charitable contribution rules and IRS substantiation requirements.
Should you have any additional questions regarding charitable contributions and tax planning for 2014, please contact your local UHY LLP professional.