Now is the time to gather all of your receipts to maximize your tax deductions. If you did make a charitable donation during the year and intend on itemizing deductions via Schedule A of your Form 1040, it’s important to understand the requirements for supporting such a deduction. The requirements vary depending on whether you’re donating cash or property and the amount you donated. Find out if you have meet the IRS standards.
What is the maximum dollar limit for charitable deductions?
The general rule is that you cannot claim a charitable deduction that exceeds 50% of your Adjusted Gross Income (AGI) in any one year. If you donated property and it appreciated, then the limit drops to 30% of your AGI. If your donation does happen to exceed these limits, you may carry forward the unused portion of the charitable deduction for five years.
Please note that you must itemize deductions to claim a charitable donation. Generally, you will itemize deductions if it’s greater than your standard deduction. This is referenced in IRC Section 170 and IRS Publication 521.
What documentation do I need?
For all monetary gifts of cash or check, you must support the deduction with a bank statement or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. If you donated via text message as it’s becoming common in the marketplace, you’ll have to support the deduction with a detailed record in your phone bill. If you contribute property of $250 or more, you’ll also need to provide the same information as detailed above for cash donations. In addition, there also must be an indication if the organization provided any goods or services in exchange for the gift.
If you donate property valued at more than $500, you’ll need to fill out Form 8283 and attach it to your tax return. On this form you have to describe each item over $500 that you donated, identify the recipient, and provide information about the value of the item, including your cost or adjusted basis. Also, keep on hand any bank or credit card statements that validate the contribution.
If you plan on donating items valued at more than $5,000, you’ll need an appraisal from a qualified appraiser to support the deduction. Please note that a deduction of this value is recorded on Section B of Form 8283.
More tax questions? Browse answers or ask your charitable tax deduction questions online.
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