The following are things to consider when making a deductible charitable contribution, depending on the type of charity, type of property contributed and the Adjusted Gross Income of the individual donor (depending on filing status).
As an individual, all charitable contributions, whether cash or noncash items, are subject to income limits. In most cases, donations are limited to 50% of your income. There are instances, however, in which your donations are limited to 20% or 30% of your income. Charitable contributions are beneficial only when individuals itemize their deductions (Reported on Schedule A).
As a corporation, charitable contributions are limited to 10% of the entity’s taxable income (before taking into consideration other deductions).
In either case, charitable donations that exceed the income limits are eligible to be carryforward for 5 years. ‘Carryover of a qualified conservation contribution can be carried forward for 15 years.’
In the wake of Hurricane Harvey (and Irma) and its devastating effects, taxpayers need to be aware of charitable contributions made to eligible organizations and if they can reap the benefit(s) on their tax return.
Not every organization is considered an eligible organization for tax purposes.
You can not take a deduction for ‘value of your time or services’ contributed. Donations to INDIVIDUALS are NEVER DEDUCTIBLE, no matter how good the cause. The money must be given to eligible organizations. Depending on the amount donated, there may be tax implications to the donor.
See celebrities who ran into a roadblock when donating to individuals for charitable purposes.
In the era of fundraising via social media and online networks – these contributions should be made with caution, especially if you are looking for a deduction at tax time.
Maintain Proper Records:
Be sure to obtain and keep proper records. In every case, I always recommend (though it is not required) my clients make donations via a check or debit/credit where contributions can be traced.
To claim a deduction for cash contribution(s) of $250 or more, you must receive an acknowledgement for each contribution from the qualified organization.
For deduction of noncash contributions, you must submit Form 8283, Noncash Contributions with your Form 1040, Schedule A to ensure certain information is reported.
To claim a deduction for noncash contributions, you must maintain records regardless of the amount.
In general, you should have written records that include: date purchased, amount paid when purchased (also known as your cost basis), detailed description of items (I’ve had cases where the IRS asked for pictures of items contributed), value of property on date contributed and method used to determine value.
There are special rules depending on the value of the property donated and if it has been enhanced, was inherited, received as a gift, traded securities, vehicles and certain other items.
You can review Publications issued for Individuals:
Publication 526: Charitable Contributions
You may review Publication issued for Corporations:
Publication 542 page 12
