Have Adequate Records
This may be self-explanatory, but many people don’t realize that for every contribution you plan to write off either needs a canceled check, receipt with the charity’s name, or bank record showing the amount you contributed. You cannot just give cash to a religious organization or other type of charitable organization without physical proof of the contribution. Having good records will help you organize these contributions since they will need to be itemized on your tax return.
The donation of household items like appliances, books, clothes, electronics and furniture is a good way write off items that are tax deductible. When doing this you must know the fair market value of these items, since the IRD will only credit you for that amount when you claim these items on your taxes. A good reference publication developed by the IRS is called Publication 561: Determining the Value of Donated Property. This publication gives great guidelines in determining the fair market value of your items while also explaining the type of information you must provide to show the charitable contribution deduction.
Know Thy Limits
When writing off contributions on taxes, you are not allowed an unlimited amount of donations. The general rule is the contributions cannot exceed 50% of your AGI (Adjusted Gross Income). If you are talking about gifts, then the conditions are a little bit lower which can drop to about 30% of your AGI.
Know Thy Organization
Make sure the group you are contributing to is an IRS approved nonprofit organization. If you are not sure if the organization, you are contributing to is approved click here (https://www.irs.gov/charities-non-profits/search-for-charities) to search the IRS database. On this site you can enter the location and name of the organization to find out if they are an approved nonprofit organization
Know Thy Value
When you donate items that are over a certain amount ($5,000 for items and $10,000 for stocks) there will be a need to get an appraisal of that item. If this is the case you must ensure that the person/company doing the appraisal is a member of a recognized group and meets the minimum qualifications set forward by the IRS, or they can deny such contribution.
Volunteering Counts Too
When you are doing volunteer work there are several deductions that can be claimed. Out-of-pocket expenses incurred due to volunteer work, such as supplies, materials, parking fees, and other items are all deductible items on your taxes. The cost of gas to and from the volunteering event is also a deductible expense.
Big Savings are in Property
If you have appreciated property that you donate (real estate, art, jewelry, etc.), then you can really save big on your taxes. As long as you have owned the property for over one year then you are able to deduct the full value (fair market) of the item. If you had the item less than a year, then you can only deduct the amount you paid for the item.
These are just a few of the charitable contributions the IRS allows tax payers to deduct from their return. For more information visit the IRS website and click on the resource link on our site for additional material on tax preparation tips, tax saving tips, and other useful tax information.