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OKLAHOMA CITY – It is the season of giving and many are volunteering their time, goods or money to charities. In fact, this time of year is when many non-profits receive a bulk of their donations.
This is also a great time for taxpayers to get a tax break for making those contributions to charitable organizations. The OSCPA recommends following the following tips for donating.
The Oklahoma Society of Professional Certified Accountants, OSCPA, recommends these tips.
Do your research first.
Only donations that are made to qualified charitable organizations are tax-deductible. If you aren’t sure whether an organization is qualified, ask to see its letter from the Internal Revenue Service (IRS.) Many organizations will actually post their letters on their websites. You can search online using IRS Exempt Organizations Select Check at www.irs.gov. Churches, synagogues, temples and mosques are considered de facto charitable organizations and are eligible to receive deductible donations, even if they’re not on the list. You can learn more about a charitable organization’s tax exempt status online at Guidestar.org and Charity Navigator.org.
Get and keep your receipts.
Cash deductions must be substantiated by a bank record (such as a canceled check or credit card receipt, clearly annotated with the name of the charity) or in writing from the organization. The writing must include the date, the amount and the organization that received the donation. You don’t have to submit the receipt with your tax return, but you need to be prepared to show it if you are audited.
Be an itemizer.
In order to claim charitable deductions on your tax return, you must itemize your deductions on Schedule A of your Federal Form 1040. Deductions aren’t available to individuals who choose the standard deduction. This includes anyone who files a short form (Form 1040A or 1040EZ). You can use the 2014 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
Do the math.
If you happen to receive something in exchange for your donation—no matter how big or small—the donation is deductible only for the amount the donation exceeds the value of any goods or services received.
Don’t forget documentation.
Be sure to document every time you give. Be sure to keep good records of all donations. If you donate non-cash items, you’ll need to be able to substantiate the value of your donation. If you leave a donation at a charity’s unattended drop site, keep a written record of the donation that includes the fair market value of the property at the time of the donation and the method you used to determine that value. There are additional rules that apply for a contribution of $250 or more.
Know your limits.
There are limits on the amount of charitable contributions you can deduct. The specific limitations can be fairly complicated, so consult your CPA if you contribute more than 20 percent of your adjusted gross income.
Keep an eye on the calendar.
All donations must be made by the end of the tax year for which you want to claim the deduction. If you put a check dated December 31 in the mail by that day, you’re okay. The same goes for donations charged by year’s end to your credit card—even if you don’t pay the bill until next year.
Keep your paystubs.
If you have elected to have money taken directly out of your paycheck for charity, keep your paystubs, Form W-2 or other document showing the total amount withheld, along with the pledge card showing the name of the charity.
Donate appreciated property.
Appreciated property can be donated to a charity instead of cash, which can yield double the bang for your buck, because an individual can deduct the property’s fair market value on the date he or she gives the gift and avoid paying capital gains tax on the appreciation. The deduction of appreciated property is generally limited to 30 percent of adjusted gross income. If the claimed value is more than $500, the organization must provide you with a Form 1098-C or a similar statement and it must be attached to your tax return.
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