Your Guide To Recordkeeping on Taxes & Charitable Donations

Make the most out giving to charity by benefiting from all the available tax breaks you’re entitled to.

Maintaining diligent records is the cornerstone to being eligible for the entire charitable contribution deduction the law entitles you to. This comprises of making sure the IRS has collected the mandatory statements for two donation categories—each donation of a minimum of $250 as well as gifts of vehicles. Tax filers intending to claim charitable contributions should ensure they’ve obtained all records required before filing their taxes.

In order to claim a deduction for a charitable gift, the contributors are required to obtain a receipt from the charitable organization for any and all contributions of $250 or greater. This entails gifts—both money and property. For property donations, the receipt has to contain, as well as other items, a description of the goods donated.

Additionally, the IRS mandates tax filers possess all receipts prior to filing their taxes. These receipts do not get filed with the taxes—however, they are required to be retained by the tax filer in addition to any other tax records.

Also, unique reporting guidelines usually are applicable to auto contributions, and taxpayers who intend to claim said contributions are required to adhere any mandatory records to their tax return. The deduction for an automobile, seacraft or airplane given to qualified charities are typically limited to the gross proceeds from its sale. This law is applicable if the total claimed value is greater than $500. Form 1098-C or a similar statement, has to be given to the contributor by the charity and adhered to the contributor's tax return.

Only contributions to qualifying charities can be tax-deductible. Taxpayers have to additionally be certain any organization they’re donating to is a qualified organization. There are tools available on IRS.gov such as Select Check, which allows you to verify credible organizations that qualify to receive deductible donations. Additionally, places of worship and government agencies qualify even without being listed.

Taxpayers must itemize their deductions on Form 1040 Schedule A to be able to claim charitable donations. Therefore, taxpayers deciding on the standard deduction are not allowed deduct their charitable donations. This also comprises of anybody who files a short form (Form 1040A or 1040EZ).

A tax savings will only be present when the sum total of itemized deductions are in excess of the standard deduction. Use Form 1040, Schedule A to decide if itemizing is more advantageous than taking the standard deduction.

Besides Schedule A, tax filers who donate property to organizations are typically required to adhere a specific form for reporting asset contributions. If the total of the deduction for all asset contributions is greater than $500, a completed Form 8283 will be required.

In addition, specific rules are applicable to charitable donations of home goods, worn clothing, financial donations, and year-end donations.

Below are the rules for charitable contributions of clothing and home goods:

Personal goods given to charity must typically be in good repair or better to qualify as a tax deduction. Any home good or clothing that a tax filer takes as a deduction and exceeds $500 is not required to meet this standard when the tax filer attaches a qualified appraisal of the item with the tax return.

Below are the guidelines for cash contributions:

An individual has to have a bank document or a written statement from the organization to be able to deduct any contribution of money, no matter what the amount. The document must display the name of the organization as well as the total contribution and the date. Bank documents consist of canceled checks, and bank, credit union and credit card statements. Financial institution statements must display the name of the organization, the date, and the total paid. Credit card statements must display the name of the organization, the date, and the date the transaction posted.

Financial gifts consists of those paid by cash or check, electronic funds transfer, credit card and payroll deduction. If taking a deductions from payroll, the tax filer must retain a pay stub, a Form W-2 wage statement or other records provided by the employer displaying the withheld amount for the charity as well as with the pledge card displaying the name of the charitable organization.

Below are the guidelines for year-end gifts

Donations are deductible for the year they were made. Contributions charged to a credit card before the end of the tax year count towards that tax year, regardless of whether or not the credit card bill isn't paid until the following tax year. Also, checks count for the tax year they were postmarked in.