How to Give and Get a Little Too: Wolters Kluwer Reviews Tax Rules for Charitable Contributions
(NEW YORK, NY, January 2018) — Writing a check, making an online pledge or donating goods to qualifying tax-exempt, charities and non-profit organizations are popular methods for earning a deduction at tax time. However, just remembering you made a donation during the year and proving it with a written record of the transaction are two different things. In addition to listing the need-to-know tax deduction guidelines on charitable and non-profit donations in the checklist below, the Protecting Americans from Tax Hikes (PATH) Act of 2015 permanently extended the provision where IRA account holders may directly donate distributions to charities.
Changes in the Tax Cuts and Jobs Act
Starting in 2018, increases in the standard deduction will mean that fewer taxpayers will benefit from itemizing deductions, including the charitable contribution deduction. For those that do itemize, the adjusted gross income limit on charitable deductions is increased from 50 percent to 60 percent.
Direct IRA Rollovers — Who Qualifies?
Individuals age 70½ (the age at which required minimum distributions must be taken) or older who gave a tax-free, direct distribution of up to $100,000 in 2016 from their IRAs to qualifying charities would qualify. The provision benefits seniors who no longer had significant expenses, such as paying down home mortgages, to donate funds from their retirement accounts as tax-deductible charitable donations – without having to report the donated amount as retirement income or claim itemized deductions instead of the standard deduction.
“It’s a popular and now permanent win-win provision for retirees who didn’t need all the money they had saved in retirement and for charitable organizations,” said Mark Luscombe, JD, LLM, CPA and Principal Federal Tax Analyst for Wolters Kluwer Tax & Accounting. “Donations below the $100,000 limit are not taxed and do not increase adjusted gross incomes (AGIs).”
Checklist for Claiming Charitable Contributions
Everyone filing returns should know the basic rules checklist for claiming charitable contributions as tax deductions:
___ Deductions must be included as itemized deductions – This is done on Form1040, Schedule A.
___ Donations must be for qualified charitable organizations – In order to receive a deduction, your contribution must be to a qualified charitable organization, typically given Code Sec. 170(c) status by the IRS and listed on their website. Deductions are not allowed for contributions to individuals, political organizations or unions for example.
___ Proper acknowledgement, proof of donation – For any cash or property, you must have a receipt (bank record, payroll deduction or written acknowledgment) identifying the organization, the value and a description of the property. If your overall noncash contributions exceed $500, you must file IRS Form 8283, Noncash Charitable Contributions, with your return; for items valued at more than $5,000, you must also generally include an appraisal by a qualified appraiser. Deductions for cash donations of any amount require either a bank record, credit card statement or a receipt or another written acknowledgement from the receiver.
___ Text message donations records – If you made a quick text message, charitable donation from your cell phone during the year, mobile phone bill records generally meet the record-keeping requirement. The billing item should include the name of the charity, date of donation and amount.
___ Know special rules for certain noncash donated property – For example, clothes and household goods must generally be in good used or better condition to be tax deductible.
___ Subtract any benefit you received for the value of your donation – For example, if you bid on football game tickets at a charity’s silent auction that had a listed value of $400, but you secured them with a high bid of $600, you may only deduct the amount that exceeds the fair market value – or $200.