Many of us donate our hard-earned time and money to charitable organizations and causes, but there is a right way and a wrong way to donate when it comes to your tax return.
One mistake is donating to unqualified organizations. While donating directly to individuals can help them quickly, it won’t get you a deduction on your tax return. Donations have to go through qualified organizations. In order to qualify for a deduction, the organization must be approved by IRS as a tax-deductible charitable organization.
IRS maintains a list of qualified organizations which you can search at https://www.irs.gov/charities-non-profits/tax-exempt-organization-search. Charitable organizations will also be able to tell you that their donations are eligible for a tax deduction. It will likely be listed directly on their receipt for the donation.
Speaking of receipts, this brings us to another mistake in donating- documentation. Failure to keep a written record of your donations means IRS could disallow your charitable donations during an audit, resulting in a bigger tax bill.
According to https://www.irs.gov/taxtopics/tc506, the guidelines for donations are:
- For all donations, cash or non-cash, you must maintain a bank record or written communication from the qualified organization listing their name, the amount, and the date of the donation.
- For donations over $250, you must keep a written acknowledgement from the qualified organization listing the amount donated and a description of the property. It will also list if you received any goods or services in exchange.
- If you donate $500 or more in non-cash donations, then your return will be required to include Form 8283 Part A, which goes into a lot more detail about the donation.
- Donations over $5,000 will require Form 8283 Part B and a qualified appraisal of the property.
Lastly, for those who volunteer for charities, you cannot claim a tax deduction for the time you served. You can deduct other costs that you incurred as a direct result of the service that were not reimbursed.
If you need help with your 1040 and adding donations to Schedule A, Clergy Financial offers tax preparation services. Visit https://www.clergytaxnet.com/services/clergy-tax-preparation/ today for more information.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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