Resources:
- IRS Publication 526: Charitable Contributions
- Eight Tips for Deducting Charitable Donations
- Substantiating Charitable Deductions
- Exempt Organization Search
Why YOU Should Care:
Your donations to qualified charities could result in a lower tax bill if you itemize deductions. Donate by December 31, 2012, to take the deduction in 2012.
Which charities qualify?
For your contribution to qualify for a tax deduction, the organization to which you donate must be an exempt organization. The most-common designation is that the organization is a “501(c)(3) organization.” Many charities will advertise this fact – or state that donations are tax deductible – on the place on their website where donations are accepted. If you are unsure, you can look up the organization here to see if they qualify.
How do I value my donation?
Cash is easiest – if you donate $100 in cash (or via check or credit card), your donation amount is $100.
Clothing, household items, and stock are valued at their fair market value – the value at which you could sell the item if you chose to go that route rather than donate. There are special rules for vehicles, works of art, and certain collectibles, so contact your tax adviser in these situations. For donations of property in excess of $500, you will have to file a Form 8283 with your annual return.
If you receive something in return for your donation (e.g., a t-shirt, tickets to an event) you must subtract the value of the item received from the total value of your donation.
Who can deduct charitable donations?
To claim charitable deductions on your tax return, you must itemize deductions for the year (rather than taking the standard deduction). This means completing and filing a Schedule A with your Form 1040 for the 2012 tax year. Choosing to itemize deductions rather than taking the standard deduction is an individual choice based on your specific tax situation and may not be the best course of action for all taxpayers. Be sure to consult your tax adviser.
How do you substantiate the deduction?
As a taxpayer, you are required to maintain documentation to support any deductions you take. Most charities are so thankful for your donation that they will assist you with this by sending you an email or letter documenting the name of the organization and the date and amount of your contribution.
If the charity does not provide documentation, you must create your own: check stubs showing the amount and date of the donation, a saved image from the charity’s website, etc.
Why now?
Donations must be completed by December 31, 2012, to count for the 2012 tax year. This means that donations made online must be completed before the ball drops on December 31. Checks sent in the mail must be postmarked by December 31.
