This week we are going to talk about charitable donations. This is a great deduction and we hope this explanation will help you as you are filling out your taxes this year. There are three different deductible ways you can donate to charity. This post is going to focus on donating property.
Property is something physical you donate such as clothing, toys, household goods, a car, art work or even real estate. If you donate more than $500 of property, you must report the name and address of the organization, what you donated, when you donated it, how and when you acquired the property, what you paid for it, what the fair market value is and how you determined the value. It sounds like a hassle but for most people it is very simple. Most people go through their house a couple of times a year and get rid of the things they don’t use anymore. They may end up with a garbage bag of clothing and toys or a truck load of things. Then they take them to the local Goodwill or Salvation Army type store. When you get to the drop off place there is usually someone who you can get a receipt from. Often the receipt is blank and you fill in the date, what kinds of things you donated and the approximate value. There are books and online websites that can tell you what a men’s dress shirt in good condition is worth and if you want to be thorough you can list each item out and look up the value. Or you can write on the receipt clothing and estimate the value. A good way is to consider what you might get for the items if you had a garage sale. The same goes for furniture, appliances, electronic equipment, toys, etc. This covers when and what you donated and the value. That leaves how and when you obtained the property and how much you paid for it. Most of this kind of property is purchase over the years and no one keeps track of everything they have purchased. Realizing this, the IRS allows you to put the word “various” in the date acquired box. What you paid for it is another tricky question. But an educated guess will work for this as well.
Donating anything valued over $5000 such as real estate or artwork requires a little more work. For these types of donation you do need to be very accurate and you need to obtain an appraisal to determine the value. If you are thinking of donating a house or art piece or other collectible item, consult your tax advisor to make sure you have everything done correctly.
There are some things you cannot deduct even though it may be an act of charity. They are:
- Political contributions
- Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar organizations.
- The value of your time or services.
- The value of blood given to a blood bank.
- Gifts to individuals or groups that are run for personal profit.
There is a lot more to know about the charitable donations deduction. We’ve really just covered some of the basics. To learn more about charitable donations as well as other tax deductions, check out our MP3 “Itemized Deductions and Gambling Winnings” at www.avoidbeingaudited.com.