BBB Tips On Deducting Charitable Contributionsby Nick LaFleur on Mar. 23, 2010, under Life
One benefit of supporting a worthwhile cause is the ability to take a federal income tax deduction for donations. To help donors to nonprofit organizations understand which of their donations are tax-deductible, BBB Charity Information Service offers these tips:
- Contributions must be made to qualified organizations to be tax-deductible. For instance, contributions to almost all 501(c)(3) organizations are deductible for federal income tax purposes. If in doubt, refer to IRS Publication 78, which lists thousands of organizations to which contributions are deductible. Churches are an exception to this rule. They are considered a 501(c)(3) without any formal declaration by a state or federal agency. Contributions to needy individuals are not deductible.
- When you itemize your deductions, contributions and pledges are only deductible for the year in which they are actually paid or delivered. One exception to this rule is contributions made to US organizations specifically for earthquake relief in Haiti or Chile after January 11, 2010 and before March 1, 2010, may be taken in either the 2009 or 2010 tax season, but not both.
- Donated clothing and other household items must be in good used condition or better. To deduct donations, taxpayers need a bank record or a written communication from the charity showing its name, the date and amount of the contribution. If donated items total more than $500, you need to fill out IRS Form 8283.
- Donated property generally may be deducted at the “fair market value” at the time of the contribution. However, there are special rules for the donation of cars and other vehicles. In certain situations, additional details concerning the property’s worth may need to be filed with the IRS to claim a federal tax deduction. IRS Publication 561, “Determining the Value of Donated Property,” has additional details.
- The value of volunteer time or services to a charity is not deductible. However, out-of-pocket expenses directly related to volunteering are usually deductible. For example, you may deduct miles driven in your vehicle as a deductible expense.
- Contributions for which the donor receives a gift or other benefit are deductible only to the extent that the donation exceeds the value of any benefit received by the donor. For instance, if the charity charges $10 for a candy bar that normally sells for $2, only $8 can be claimed as a charitable contribution. Another example would be the purchase price of tickets to a fund raising dinner or entertainment event. Only the portion of the ticket price in excess of the value of the meal or entertainment can be deducted.
BBB urges donors to seek professional advice if they are in doubt about the deductibility of contributions. Other helpful tips for tax-deductible donations are posted on BBB website (www.give.org) and the IRS website (www.irs.gov).