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Giving To Charities – Tax Deductions And Such
By: Richard Chapo
The tax code in the United States contains many provisions to promote certain
behavior. One area of behavior is the promotion of giving to qualified
charities.
Giving To Charities – Tax Deductions and Such
In the rush to get tax returns prepared and filed, many people absentmindedly
forget to include deductions for contributions to charities. If you itemize
deductions on your tax return, this can be an expensive omission.
Pursuant to relevant provisions of the tax code, you can take significant
deductions if you donate money or goods to a qualified charity. A qualified
charity is one that is registered with the IRS as a 501c3 entity. The 501
designation refers to the relevant section of the tax code.
Importantly, not all charitable organizations are qualified with the IRS. You
can go to the IRS web site and search through a list to see if a particular
group is included. If they are not, red flags should go be raised.
Before claiming your deduction for donations, there are a couple of things to
keep in mind:
1. Politics – You may feel strongly about certain political ideologies, issues
or candidates. You can contribute to the causes, but you can’t deduct the
contributions as charitable giving.
2. You can only deduct contributions actually made for the year in question. If
you forgot to claim donations on your tax return for the 2004 year, you cannot
claim them on a 2005 return. Instead, you should go back and amend the 2004
return.
3. If you make a contribution for a good or service, you can only deduct the
amount you contribute which is in excess of the fair market value of the good or
service. For instance, many charitable groups will hold auctions to raise money.
If your winning bid for a two night hotel stay is $800, you can claim a
deduction for the bid amount minus the normal cost. You cannot just write off
$800.
4. In general, donations of stock or property should assigned the fair market
value, not an arbitrary figure based on your opinion. Big ticket items should be
supported with an appraisal.
5. The rules for donating automobiles have changed. The charitable group should
have sent you correspondence regarding the amount it was able to sell the
vehicle for. This is the amount you can deduct, not the blue book amount
previously allowed. If the charity has not sent you anything, call them to get
written confirmation. They know it has to be done under new IRS regulations.
Donating to charities is positive moral step. Make sure to claim your deductions
to reap savings on your taxes.
About the Author:
Richard A. Chapo is with http://www.businesstaxrecovery.com - recovery of business taxes through tax help and tax relief. Visit http://www.businesstaxrecovery.com/articles to read more business tax articles. |
