Rules For Deducting Cash And Non-Cash Charitable Contributions

To be deductible, the contributions must actually be paid in cash or other property before the close of your tax year, whether you use the cash or accrual method. It is very important that you keep proper records of all your cash and non-cash contributions.

Rules for Deducting Cash Contributions

You cannot deduct a cash contribution, regardless of the amount, unless you keep a record of the contribution. The following rules apply:

• For individual contributions under $250, your proof can be your canceled check or your receipt, or a bank statement containing the name of the charity, the date, and the amount.
• For individual contributions of $250 or more, you must obtain a written acknowledgement from the organization, as proof of the contribution. In figuring whether a contribution is $250 or more, you must not combine separate contributions to the same organization; each payment is treated as a separate contribution.
• A written acknowledgement for a contribution of $250 or more must be received before the due date of the tax return (including extensions) and must include: (a) the amount of the cash contribution, (b) whether the qualified organization gave you any goods or services in return for the contribution (other than certain token items and membership benefits), and (c) a description and good faith estimate of the value of any goods or services that were provided to you in return for the contribution.

Rules for Deducting Non-Cash Contributions

Generally, non-cash charitable contributions are tax deductible at the fair market value (FMV) of the property contributed. The following rules apply to non-cash contributions:

• For donations of used cars, boats, airplanes, if you claim a value of $500 or more for any of these items, you must obtain a written acknowledgement from the organization. The deduction allowed is the smaller of the fair market value (FMV) on the date of the contribution, or the gross proceeds received from the sale of the item.
• For donated motor vehicles, a used car guide can be used to determine the FMV of the vehicle.
• You must file Form 8283, Non-cash Charitable Contributions with your tax return if your total deduction for non-cash contributions for the year is over $500.

Rules for Deducting Non-Cash contributions Over $5,000

If you donate non-cash property valued at over $5,000 to a qualified organization, the following rules apply:

• If the value of the property (other than publicly traded securities) exceeds $5,000, a qualified appraisal of the property must be done.
• You must attach Form 8283 to the tax return to support the charitable deduction, and the donee must sign Part IV of Section B, Form 8283.
• The person who signs for the donee must be an official who is authorized to sign the donee’s tax or information returns, or a person specifically authorized to sign by that official.
• The signature does not represent concurrence with the appraised value of the contributed property.
• A signed acknowledgement represents receipt of the property described on Form 8283 on the date specified on the form. The signature also indicates knowledge of the information reporting requirements on dispositions. A copy of Form 8283 must be given to the donee.

Donating Your Services

You cannot claim a deduction for the value of your services contributed to a qualified organization, including the value of lost income, while working as an unpaid volunteer. Some expenses incurred while working as a volunteer, however, are deductible if they are:

• Unreimbursed.
• Directly connected with the service.
• Solely attributable to the service.
• Not personal, living, or family expenses.

For example, you can deduct either your actual car expenses, or the standard rate of 14 cents per mile. You can deduct travel expenses only if there is no significant element of personal pleasure, recreation, or vacation in such travel.

The primary objective of this article is to empower taxpayers to learn to do their own taxes. For detailed information on how to deduct gifts to charity, grab yourself a copy of “Doing Your Own Taxes is as Easy as 1, 2, 3,” ($6.98) on TaxConnections.com

Milton G Boothe is an IRS Enrolled Agent with over twenty years of tax and financial accounting experience, including several years at PricewaterhouseCoopers. He is also a British certified Chartered Accountant. He is currently employed in private tax practices where he helps people resolve their tax problems, minimize their taxes, and routinely represents the interests of taxpayers before the Internal Revenue Service. As an Enrolled Agent (EA) Boothe is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the IRS for audits, collections, and appeals.
Milton G Boothe is also the author of several tax publications, wherein he encourages people to empower themselves by learning to do their own taxes.

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