Charitable Contribution Tax Deduction Reminders

One of the greatest aspects of the Christmas season is that Christmas is the season for giving. Many people like to think that while they are in the Christmas spirit and helping others, they also like to know that they are helping themselves with a year-end tax deduction. Yet many people are confused about the IRS charitable tax deduction rules. Here are some of the most basic charitable deduction rules that taxpayers should keep in mind as they contribute this holiday season.

1. You have to itemize to be able to deduct charitable contributions. Standard deduction filers cannot deduct their charitable contributions.

2. Your contributions must be to a qualified organization, such as a church, nonprofit school or hospital, Red Cross, etc. Cash given directly to needy individuals is not deductible.

3. The amount of non-cash contributions to deduct is generally the fair market value of the property at the time of the contribution.

4. You cannot deduct the value of any time or services you provide to a charitable organization. However, you can deduct any costs incurred while doing volunteer work, such as car mileage and supplies.

5. Cash contributions include payments by cash, a check, electronic funds transfers, payroll deductions, and credit card.

6. For any cash contribution, no matter how small, you must have some proof of the contribution. This proof could be a bank statement, cancelled check, or a credit card statement.

7. For cash contributions over $250, you must have a written acknowledgement from the qualified organization.

8. For any non-cash contribution, you must have a receipt from the qualifying organization.

9. For a non-cash contribution over $250, you must have a written acknowledgement from the qualifying organization.

10. There is an overall limit on the contributions deduction for any year of 50% of Adjusted Gross Income. If your contributions in any year exceed this limit then you can carry over the unused portion for up to the next five years.

These are just the basic rules for charitable contributions deduction. The rules can get pretty complicated, especially if you’re donating appreciated property like stocks. For more detailed information, check out IRS Publication 17, Your Federal Income Tax For Individuals, and IRS Publication 526, Charitable Contributions. You can find both these publications on the IRS web site at www.irs.gov.