WASHINGTON — Individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years. Continue reading “New Tax Provisions Clear Up Confusion in Charitable Donations”
Many people contribute to charities throughout the year, but the holiday season seems to be time of increased attention toward the less fortunate. It’s always good to give any unused household items or other things that you can part with to charities so they can be used by others. Even though you can be motivated by altruism in this activity, remember you can also claim tax deductions for most donations, whether they be for money, clothing, vehicles, or other items.
In order to claim deductions for charitable donations, the IRS requires that you keep adequate records of your gifts. And this year, taxpayers will be required to back up their donations with more comprehensive recordkeeping than before. That means you’ll need to make sure you are asking for receipts and storing them in Shoeboxed so you can get your full deductions.
According to the IRS, you must have a bank record or written communication (a.k.a. a receipt). These acceptable documents include canceled checks, bank statements that include the name of the charity, the amount of contribution, and the date.
The IRS now requires these records for all deductions, regardless of the amount of contribution. For donations of more than $250, you must have a written acknowledgement specifically from the charitable organization. For donations of more than $500, you must complete a Form 8283, Noncash Charitable Contributions.
Also new to the deductions rules are regulations regarding vehicle donations. In the past, you could claim an automatic $5000 deduction for a vehicle, but now you can only claim what the charity sells the vehicle for at an auction. If the charity is going to keep it for itself, you can only deduct whatever the “fair market value” is of the vehicle.
As you are getting ready to file your taxes this year, we hope you have kept your receipts so you can maximize your deductions!