Tax Deductions for 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!

Tax Tip: Keep Receipts for Charitable Donations

Internal Revenue Service Tax Tips on Shoeboxed Blog

Did you make a cash contribution to your favorite charity? Have you recently spent a weekend cleaning stuff out of your garage or basement that you then donated to a local charity?

Charitable contributions can be tax deductible, but you must have the proper records to support your deduction. Due to the Pension Protection Act of 2006 the rules on recordkeeping for charitable contributions became a little more strict beginning in January 2007.

To deduct a charitable cash donation, regardless of the amount, you must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Acceptable bank records would include canceled checks or bank or credit union statements containing the name of the charity, the date and the amount of the contribution.

Under the previous rules, records such as personal bank registers, diaries or notes made around the time of the donation could often be used as evidence of cash donations. Personal records like this are no longer sufficient.

Here are some additional tips to help you deduct your charitable contributions on your 2008 federal tax return.

  • Charitable contributions are deductible only if you itemize deductions using Form 1040.
  • Contributions must be made to a qualified organization.
  • Used clothing and household items such as furniture, linens and appliances must be in good used condition.
  • Vehicle donations are subject to special rules.
  • To deduct charitable contributions of items valued at $250 or more you must have a written acknowledgment from the qualified organization.
  • To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.

More information is available on the IRS Web site at IRS.gov. A good resource is IRS Publication 526, Charitable Contributions, found on the web site or by calling 800-TAX-FORM (800-829-3676).