Tax Deduction for Charitable Donations
Donations to charity are tax deductable expenses and can reduce your taxable income and lower your tax bill. However, not everyone will be able to deduct their charitable contributions. You need to itemize your tax deductions in order to claim any donations. The rules for claiming donations are as follows:
You must actually donate cash or property. A pledge or promise is not deductable until you make the payment.
You must contribute to a qualified tax exempt organization. Most of these organizations have a 501(c)(3) status.
You must get a receipt for the donation made to such organization. The receipt must mention that no products or services were given in exchange for the donation. It is also preferable that the receipt mention that the organization is tax exempt.
You must meet the record keeping requirement including canceled checks, acknowledgement letter, appraisals of property donated, fair market value calculations, etc.
Non-cash contributions - such donations are subject to strict record keeping and substantiation rules. You must be able to substantiate the fair market value of the goods or property you donated, plus keep any return acknowledgement you receive from the organization. In many cases, the organization already have the fair market values for various items they receive. Therefore, please ask them to provide you such value. For example, following are the fair market value guidelines of various property issued by Goodwill, Salvation Army and Interfaith organizations.
Valuation Guide - Salvation Army
Valuation Guide - Goodwill
Valuation Guide - Interfaith Works
You must attach Form 8283 if your non-cash contribution is more than $500.
You must have a written appraisal if your non-cash contribution is more than $5,000
