What Qualifies as a Charitable Tax Deduction?

A Charitable tax deduction is a deduction that you can claim when you donate money or property. Making a charitable tax deduction allows you to save money on taxes and contribute to charitable causes. It is a popular deduction, but one that is not as simple as many taxpayers assume. In order to qualify for a tax deduction, you must donate to a charity that is legally recognized as a tax-exempt organization. Furthermore, your donations must not violate certain specific rules.

Finding a Tax-Exempt Charity

In order to claim a charity tax deduction, you must donate to a charity that is recognized as tax-exempt under 501(c) provision of the United States Internal Revenue Code. This includes churches, employee beneficiary associations, social and recreational clubs, veteran organizations and financial cooperatives, among others. The Internal Revenue Service (IRS) maintains a detailed list of every type of eligible organization on their website. You can check a charity's tax exempt status by typing the name in search engine located at http://www.irs.gov/app/pub-78/.

The IRS reserves the right to withdraw a charity's tax exempt status if it participates in political campaigns or engages in lobbying and that is why it is important to check the charity's tax-exempt status every tax year.

What You Can Donate

In order to claim a charity tax deduction, you must donate cash or property before the end of the current tax year. Pledging to donate the cash or property doesn't count and you cannot write it off.  There are no limits on what type of property you can donate. However, there are limits on the value of your donations.

  • Cash donations, you can't deduct more than 50% of your adjusted gross income.
  • Property donations, you can't deduct more than 30% of your adjusted gross income.

Anything that exceeds those limits can be carried over into the next tax year. However, you cannot carry over your contributions for more than five years in a row.

Keeping Good Records

In order to be able to claim a charity tax deduction, you must keep detailed records of your contributions. This includes cancelled checks, letters of acknowledgement from the charity and property appraisals. If the total value of your donations exceeds $500, you must attach the above-mentioned records to your tax return.

If the property you are contributing is worth more than $5,000, you must obtain a written appraisal of fair market value. If you are donating a car, a boat, a plane or any other vehicle that is worth more than $500, you must also receive a written acknowledgement from the charity.

Claiming the Deduction

Once everything listed above is taken care of, you can proceed to fill out your tax return. You can claim charitable tax deductions by filling out lines 16-19 of Schedule A of form 1040. You must make sure you itemize the deductions properly, otherwise, they won't count. If the total value of your non-cash donations is over $500, you must also fill out Form 8283.

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