Get Ready for Taxes: Donations May Cut Tax Bills

WASHINGTON — The Internal Revenue Service reminds taxpayers looking to maximize their tax savings before the end of the year to consider charitable giving. Many taxpayers may already be planning on doing so for #GivingTuesday on Nov. 28. Giving money or goods to a tax-exempt charity before Dec. 31 can usually be deducted on that year’s federal income tax return. Taxpayers are urged to consider the following before donating:

Only Donations to Eligible Organizations are Tax-Deductible.

The IRS Select Check tool on IRS.gov is a searchable online database that lists most eligible charitable organizations. Churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in this database.

Itemize to Claim Charitable Donations

Charitable deductions are not available to individuals who choose the standard deduction. Only taxpayers who itemize using Form 1040 Schedule A can claim deductions for charitable contributions. Tax preparation software usually alerts taxpayers to the tax savings options available if itemized deductions exceed the standard deduction. The IRS.gov website can help you answer the question, “Should I itemize?

Get Proof of Monetary Donations

A bank record or a written statement from the charity is needed to prove the amount and date of any donation of money. Money donations can include various forms apart from cash such as check, electronic funds transfer, credit card and payroll deduction. Taxpayers using payroll deductions should retain a pay stub, a Form W-2 wage statement or other proof showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

Donating Property

For donations of clothing and other household items the deduction amount is normally limited to the item’s fair market value. Clothing and household items must be in good or better condition to be tax-deductible. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with their tax return.

Donors must get a written acknowledgement from the charity for all gifts worth $250 or more. It must include, among other things, a description of the items contributed. Special rules apply to cars, boats and other types of property donations. The IRS.gov website has information to help you determine the value of donated property.

Note Any Benefit in Return

Donors who get something in return for their donation may have to reduce their deduction. Benefits can include merchandise, meals, tickets to an event or other goods and services. A donation acknowledgment must state whether the organization provided any goods or services in exchange for the gift along with a description and estimated value of those goods or services.

Older IRA Owners Have a Different Way to Give

IRA owners age 70½ or older can transfer up to $100,000 per year to an eligible charity tax-free. The transfer can count as their required minimum distribution for the year. Funds must be transferred directly by the IRA trustee to the eligible charity. For details, see Publication 590-B.

Good Records

The type of records a taxpayer needs to keep depends on the amount and type of the donation. An additional reporting form is required for many property donations and an appraisal is often required for larger donations of property. Visit IRS.gov for more information.

#GivingTuesday

by Debby Winters

Today, November 28, 2017 is #GivingTuesday and the IRS reminds taxpayers looking to maximize their tax savings before the end of the year to consider charitable giving. Many taxpayers may already be planning to do so for #GivingTuesday. Giving money or goods to a tax-exempt charity before December 31 can usually be deducted on that year’s federal income tax return. 

This #GivingTuesday, IRS has tips to find tax-deductible options

  • Donating to disaster recovery efforts or a local shelter?
  • Want to know the special rules to get a tax deduction from donating cars, boats and other property?
  • Cash or non-cash year-end gifts to charity? What to know for a tax deduction on your IRS return.
  • IRA owners over age 70½ – want to know about a different way to give?
  • Hoping for a tax-deduction for your Giving Tuesday donation? Itemize or eFile your return

Taxpayers can use IRS Select Check tool before Donating on Giving Tuesday

Giving Tuesday is an annual event celebrated the week after Thanksgiving to kick off the season of charitable giving. Taxpayers making donations may be able to deduct them on their tax return. As people are deciding where to make their donations, the IRS has a tool that may help.

Exempt Organizations Select Check on IRS.gov is a tool that allows users to search for charities. It provides information about an organization’s federal tax status and filings.

Here are four facts about EO Select Check:

  • Donors can use it to confirm an organization is tax exempt and eligible to receive tax-deductible charitable contributions.
  • Users can find out if an organization had its tax-exempt status revoked. A common reason for this is that the organization did not file its Form 990 or notices annually as required.
  • EO Select Check does not list certain organizations that may be eligible to receive tax-deductible donations. This includes churches, organizations in a group ruling, and governmental entities.
  • An organization’s “doing business as” name is not searchable. Search using an organization’s legal name instead.

Taxpayers can also use the Interactive Tax Assistant, Can I Deduct my Charitable Contributions? to help determine if a charitable contribution is deductible.