Write Off Your Donation the Right Way on Your Taxes

The government rewards generous people, allowing them to write off certain kinds of donations from their taxes. Writing off donations can be a tricky business, so you need to pay close attention to a number of factors, such as the beneficiary of your donations, the proper valuation and documentation, the forms you need to fill out and others. To help you write off your donations properly, follow these tips.

Selecting the Donation Beneficiary

Not all types of donations are deductible. Only those made to qualified charitable organizations may be deducted from your taxes. To get an idea as to which organizations are qualified, you should check out Publication 526, where the names and addresses of qualified charitable institutions are listed. As a general rule, donations made to churches are qualified for exemption, so even if your church is not listed in the publication, you may still be able to claim your donations to your church as tax deductions provided that you comply with the requirements set by the IRS. 

Valuing the Donation

Donations may be made in cash or in terms of merchandise and property. Based on the guidelines set by the IRS, for tax purposes, goods, merchandise and property donated should be valued based on their currently estimated value.

The IRS has strict guidelines when it comes to high-priced donations. If you want to claim that the object you donate to charity is worth, for instance, $5,000, you will need to get a written appraisal from a qualified person to establish the true value of the donation. For the 2010 tax year, if the value of your donation is above $20,000 but below $50,000, you will need to submit a written appraisal of the value of the object together with a detailed description and current pictures of the object or property to the IRS. If the object donated is worth more than $50,000, you will need to request a Statement of Value from the IRS and pay the appropriate processing cost before your donation can be appraised by the IRS. Only when you have fully complied with the requirements of the IRS regarding value will you be able to deduct the amount of your donation from your taxes.

Forms and Documentations Needed

The IRS requires the use of specific forms for certain donation amounts. For the 2010 tax year, if your non-cash donation is more that $500 but less than $5,000, you need to file IRS Form 8283, section A. If your donation costs more than $5,000, you should file IRS Form 8283, section B. Necessary documents such as receipts, property descriptions and pictures should accompany your returns.

Avoiding Problems

Simple mistakes in your tax returns can get your into trouble with the IRS. To avoid problems with the IRS, you should keep accurate records of your donations, get proper receipts for all your donations and value your donations according to the rules set by the IRS. When requesting documentation from a beneficiary, make sure that all documents bear the official letterhead of the beneficiary organization. Also, you should see to it that you write off all your charitable deductions during the same year when you made them.

blog comments powered by Disqus