season is one of the greatest times for gift giving, not only to friends and
loved ones, but also to charities and other organizations. As the holidays also
fall within most individuals' end-of-year tax planning, many people may also
want to write off some of the amounts and assets they gift. While this can earn
households a valuable charitable contribution deduction, it's important to
follow the rules associated with this tax benefit in order to qualify for the
write-off and avoid potential tax issues.
There are a
number of common mistakes many people make when it comes to deducting
charitable contributions, and knowing what to avoid can help individuals claim
the benefit without any problems. For instance, it's important to ensure that
any organizations receiving donations for tax purposes are considered
"qualifying" under federal tax law. Examples of qualifying
organizations include religious organizations, most nonprofit charitable
organizations (such as the American Red Cross), most nonprofit educational
organizations, nonprofit hospitals and medical research organizations,
nonprofit volunteer fire departments and nonprofit organizations that
develop and maintain public parks and recreation facilities. Individuals who
are unsure about whether an organization is qualified should consult with their
you get proper documentation
It's also important for individuals who donate assets and cash to get a written
acknowledgement from the charity detailing the amount of assets gifted over,
and whether the donor received anything in exchange for the gift. This is
especially important for cash or assets of $250 or more. The Internal Revenue
Service often scrutinizes charitable contributions closely, especially for
higher amounts. Therefore, securing information from the charity that outline
the fair market value of any items received, the date the contribution was made
and any other important details can be helpful in the event of an audit.
important to make sure all checks are sent on time. During the holidays, mail
delivery tends to slow and it may take longer for charities to receive checks.
Therefore, individuals should ensure their mailed checks are postmarked on or
before Dec. 31 to receive credit for the 2013 tax year.
those who are donating gifts of high value - such as real estate, paintings,
antiques or shares of a family business - securing an up-to-date valuation is
important. Confusion over the value of gifted assets can cause issues with the
IRS, especially if items are aggressively overvalued, so securing a valuation
from a professional can help eliminate some of these errors.
For a more
in-depth look at Liberty Tax Service, visit the Give Me
Liberty! Magazine. Follow Liberty Tax on Facebook and on Twitter or contact
Liberty Tax directly at 1-877-at-Liberty.