It’s the season for giving… and the IRS is doing their part to
encourage your charitable contributions. If you itemize your deductions,
your donations may be deductible when you get started on your 2012 tax return. Keep
in mind that these deductions are only eligible in the year they are made so be
sure to make your donations before the end of the year. To help plan your
end-of-year giving, here are a few strategies to consider:
When making cash donations, all taxpayers must retain a bank
record or receipt from the charity showing the amount and date of the
contribution. As long as you have the appropriate records to support you
deduction, you can include any contributions made by cash, check, credit card
payment or payroll deduction.
When making non-cash donations of household
goods or clothing, you’ll also want to be sure to secure a receipt from the
charity detailing the items being donated, name of the charity and date of the
donation. Additionally, be sure to estimate and document the fair market
value of the property being donated. If the total value of your donations
exceeds $500, you’ll need these details to complete Form 8283 which must be filed with your tax return.
In addition to clothing and household items, it
is common for taxpayers to donate automobiles to charitable
organizations. The rules for donating a vehicle are slightly different. The amount that can be claimed
will be based on how the charity or nonprofit organization actually uses the
vehicle. If the organization sells your donated vehicle without using it in any
significant way, the charitable deduction cannot exceed the gross proceeds of
the sale. If the organization uses the vehicle, rather than sell it, you must
have documentation of the vehicle’s value, or fair market value. The receiving
organization should issue form 1098-C. One
copy of this form should be kept with your records and the other should be
attached to the tax return.
Lastly, since donations made only to qualified
organizations are eligible, be sure to do your homework before claiming any
deductions on your return. You can refer to the IRS Exempt Organizations Checklist to search for
As 2012 comes to an end, I hope you’ll consider how your
charitable contributions might not only reduce your
tax burden but also help someone in your community.
Holidays from Liberty Tax Service!