We are not responsible for the accuracy of the
following information. Please check with your own tax advisor.
What You Can Deduct
As long as you itemize on your tax return, you may deduct gifts
to religious or charitable organizations. You also may deduct
contributions made to scientific, literary, and educational
organizations, as well as to organizations devoted to the
prevention of cruelty to children or animals or those that foster
amateur sports competitions.
Deductible gifts to nonprofit can take many forms. You can deduct
cash contributions up to 50 percent of your adjusted gross income
(AGI), and any excess contributions can be carried forward for up
to five years. You also can make donations of property -- from
used clothing, to furniture, to computer equipment -- and earn
tax deductions. When you donate property, your deduction is
generally equal to the fair market value of the property at the
time you give it, not its original cost.
To make the most of your charitable contributions, consider
donating appreciated capital gains property that you've owned for
more than a year, such as shares of stock or a mutual fund. When
you donate long-term property that has appreciated in value, you
generally earn a deduction for the property's fair market value
and never have to pay capital gains tax on its appreciation.
Contributions of appreciated capital gains property are generally
limited to 30 percent of your adjusted gross income.
What You Cannot Deduct
Generally, gifts to individuals are not deductible. You also
cannot claim a deduction for political contributions, gifts to
labor unions, donations to homeowner's associations, or gifts
used for tuition.
Payments made partly as a contribution and partly in
consideration for goods or services furnished to the donor by the
nonprofit -- referred to as quid pro quo contributions -- are not
fully deductible. For example, if you buy a $100 ticket to a
nonprofit concert performance and the equivalent ticket normally
costs $40, you may deduct only $60. If you choose not to attend
the event and return the ticket to the nonprofit to be resold,
however, you may deduct the full $100.
When To Make Your Deductible Contributions
To qualify for a deduction in a given tax year, you must make
your gift by December 31st. That includes checks or properly
endorsed stock certificates mailed by New Year's Eve or a gift
charged to a bank credit card by that day.
Documenting Your Contribution
Canceled checks are sufficient documentation for cash donations
under $250, but you'll need more proof of your generosity if you
donate $250 or more. The rules require that you have a receipt,
letter or other statement from the charitable organization
listing the amount of the cash donation, or, for contributed
property, a description of the property donated. In addition, the
receipt must state whether or not the nonprofit provided any
goods or services in exchange for the cash or property. Where a
charitable organization provides goods or services in exchange
for contributions over $75, the organization must provide the
donor with a good faith estimate of the value of the goods or
services provided. For non-cash contributions over $500, you must
complete Form 8283 and attach it to your tax return. If the
non-cash contribution exceeds $5,000 ($10,000 for gifts of
closely held stock), you also may have to obtain and attach a
written appraisal. A summary of the appraisal should be attached
to the tax return to substantiate the deduction.
(Additional requirements apply to contributions of art if you are
claiming a deduction of $20,000 or more.) There is no appraisal
requirement for publicly traded securities for which a market
quote is readily available on an established stock exchange.
CPAs recommend that you make sure that you have adequate receipts
and other documentation for your charitable gifts. Doing so will
make the preparation of your tax return a little easier next year
and give you peace of mind in knowing that should you be audited,
your records are in order.