April 15th: It’s the 105th day of the year, it’s Leonardo Da Vinci’s birthday, and it’s also Titanic Remembrance day (who knew?). But for most people, April 15th is dreaded tax day, where everyone must have their income taxes filed. If you are part of the 83% of Americans, who donated $358.38 billion(!!!) to charities in 2014, there are specific tax benefits that can help put money back in your pocket. While filing your taxes may be stressful, the BBB is here to help you on how to get the most out of your charitable contribution. Below are some tips on common deductibility questions.
- Only itemizers can deduct contributions. Contributions are deductible for the year in which they are actually paid or delivered. Pledges are not deductible until the year in which they are paid.
- Direct contributions to needy individuals are not deductible. To be tax deductible, contributions must be made to qualified organizations.
- Keeping records of contributions is essential for itemizers. Acceptable records include bank records and written communications from the charity. Contributions of over $250 require a contemporaneous written acknowledgment from the charity.
- There are over 20 categories of tax-exempt status. In general, only organizations classified as 501(c)3 and 501(c)19 are eligible to receive contributions deductible as charitable gifts.
Charity Auctions, Dinners, Galas, and Balls
- The general rule of thumb is that only the amount above the fair-market-value of your auction purchase would be deductible as a gift.
- For example: at a fundraising event conducted by a charity, you pay $1,000 for a week’s stay at a beach house. The fair market value of this vacation is $600. Therefore, only $400 of the purchase would be deductible in this circumstance.
- If you buy a ticket to a dinner for $100 and a similar meal at the hotel is $25, then only $75 dollars is deductible.
- Some events may be very expensive, so if you don’t feel comfortable spending large sums of money on a dinner, you always have the option of making a direct donation, instead of attending the event.
- Determine whether your goods are in good used condition, and if it’s something the organization accepts.
- Make a list of the items you’re donating.
- Be sure to get a receipt from the organization to which you donate.
- If you donate an Item valued at over $500 it may be in “fair” condition, but you will need to include a qualified appraisal with your tax return. For any noncash contribution over $500 you will need to complete and attach IRS form 8283 on your next tax return.
- If you are not familiar with the charity that is soliciting, check its website and see how the donation will benefit the organization. Sometimes the names of well know nonprofits are used without permission.
- Verify that the recipient is tax-exempt as a 501c3 nonprofit, and check the IRS guidelines on vehicle deductions(publication 4303)
- If you are claiming a car donation of over $500, you will need to complete and attach form 8283. If the car is worth more than $5,000, you will need to get a written professional appraisal. Many taxpayers find appraisers by contacting local car dealers.
- Make sure the title of the car is transferred to the charity’s name, not an individual, and keep a copy for record.
BBB always encourages consumers to do their research before making any donations to charities. If you are looking for a charity to donate to, or if you are looking for assistance during tax season, check out findacompany.org for Accredited organizations who adhere to BBB’s eight standards for trust.