The Internal Revenue Service (IRS) grants organization eligibility in receiving donations and giving them a tax-deductible status. Qualified organizations meet requirements upon obtaining the status that allows taxpayers to claim charitable deductions. You may ask the organization about their status in which they should be able to provide you with details. There is also a listed publication (IRS Publication 78) available through the IRS that lists qualifying organizations.
The most common way in determining if the organization is qualified is to review organization types. There are 5 general types of organizations that will have an assigned status such as a 501(c)(3) or other similar that makes the organization qualify:
Community foundations, trusts and organizations organized with specific purposes including religious, charitable, educational, literary, scientific, animal/human cruelty and sports related organizations.
- Organizations for war veterans including posts, trusts, foundations and auxiliaries organized in the United States.
- Many fraternal societies in relation to organization types mentioned in number 1 may be consider a qualify organization.
- Cemetery nonprofits and cooperation’s.
- A political subdivision or Indian tribe government that performs government actions. This may include donations made to the police department toward a reward in solving a crime or an organization that collects voluntary contributions for the social security trust fund.
Examples of organizations include church ministries, temples, charitable organizations such as the Red Cross, nonprofit educational groups such as the Boy/Girls Scouts, medical research organizations, public parks and civil defense organizations. The IRS provides detailed information on contributions made to organizations outside the United States. Donations made are usually listed as an itemized deduction on your federal income tax form. There are limitations based on your income of how much you can claim. It is a good idea to obtain a receipt or documentation from the organization to use upon filing. Many organizations do this automatically upon receiving your donation.
If your donation is goods or property, the value is determined based on fair market value when the donation was made. If you volunteered a certain number of hours, they may also count as a deduction as long as they work performed was with a qualifying organization and you have proper documentation that shows logged hours. It is important to understand the value of charitable donations since the amount you contributed may vary from the amount you report in the form. Many charities will mention what the tax deductible portion of your donation will be.
Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from credit cards to mortgages to umbrella companies .
Don’t File Your Taxes Yet If You Gave to Chile
With the recent Chile Earthquake on the minds of millions of Americans, the US House of Representatives is looking to add a Chile donation special tax deduction similar to the one in place for Haiti relief efforts. If the measure is approved, charitable donations sent to help Chile victims of the earthquake will be deductable on taxpayer’s 2009 tax returns although the donations are actually being made in 2010. Donations would need to be made before April 15th, the tax filing deadline.
The US House of Representative bill was passed without any opposition with the bill now on its way to the Senate for approval. An additional measure in the bill allows for Haitian donations to be made up until April 15th, an extension of over a month. So holding off until the bill passes will be helpful for those looking to make such donations.
If you have already filed your 2009 taxes but do not want to wait until next year to claim your charitable donations, amending your return by filing a 1040X will provide you the deduction this calendar year.
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Ten Tips To Deducting Charitable Gifts
The IRS has released ten tips to help you deduct charitable gifts this tax season. When completing your Schedule A for your federal tax refund, don’t forget to take your charitable contributions as they can add up to a good sized tax deduction. Here are the rules to make sure you get the deduction:
1. Contributions must be made to qualified organizations.
2. You cannot deduct time or services, only money and gifts can be deducted.
3. Any merchandise received in exchange for a gift must reduce the value of your gift for the tax deduction.
4. Fair market value must be used for stock and property donations.
5. Items must be in good condition or better to be allowed.
6. Save your bank records for any money donations you make and save the records with your tax return.
7. Also get a written acknowledgement from the organization when you make a donation greater than $250.
8. IRS Form 8283 must be used when your property contributions exceed $500 in value.
9. You must get an appraisal when donating property valued greater than $5,000.
10. If you donated to a Midwest disaster relief area you get special benefits which you can read about in Publication 4492-B.
If you are philanthropic by nature, and have a financially comfortable retirement, you may be wondering the best way to donate to your favorite charity. If you are at least 70-1/2 you have a special opportunity in 2008 and 2009. If you transfer your funds from an IRA directly to the charity, they will not be included in your taxable income, as they would if you took an IRA distribution and paid it over to the charity.
You may be wondering why this matters, as the charitable payment is tax-deductible. However, many deductions depend on your adjusted gross income (AGI), for instance medical expenses are only deductible to the extent that they exceed 7.5% of AGI, so if you can keep the money out of your income it will help your tax situation. If you need to make a required minimum distribution for 2008 from your IRA plan to avoid penalties, you have until April 1, 2009 to donate directly to charity, satisfy your minimum distribution, and avoid having the amount counted as income to you.