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Investment Planning |
Deducting Gifts to Charity
To deduct gifts of cash or property on your tax return, be sure you comply with the following new rules.
Gifts of Cash
You are now required to have documentation for every cash donation, regardless of size. A bank record, such as a cancelled check or credit card statement, or a written confirmation from the charity with the charity's name, date and amount of the contribution will suffice.
To claim a deduction for non-cash items, they must be in good condition, or better. However, you may claim a deduction of more than $500 for any single item, regardless of condition, if you include a qualified appraisal of the item with your tax return.
When donating a vehicle, a charitable deduction over $500 is not allowed, unless you receive written acknowledgment from the charity at the time of your donation. Your deduction may be limited in other ways, too. For instance, if the charity sells the vehicle, your deduction is limited to the gross proceeds from the sale (unless the charity significantly used your vehicle or made material improvements to it).
Is the paperwork hassle worth it? Probably. Your after-tax benefit from each charitable gift will generally be your tax bracket multiplied by the value of your gift. For example, if your combined federal and state tax bracket is 41%, you'll get a tax benefit of $41 for every $100 of cash or goods donated.
Tips Disclaimer
These tips contain information that may change over time as a result of new tax legislation. Although we make efforts to keep this information current, you should check with your tax advisor before taking action based upon any information contained in these tips.