At this time of year, many people desire to help others who are less fortunate than they are by making contributions to charity. By planning carefully, you may be able to realize tax benefits when donating cash and property to qualified charitable organizations.
This makes now a good time to plan out your charitable giving strategies for the rest of the year. Charitable contributions you make between now and December 31, 2017, could reduce your 2017 income and resulting tax bill.
Charitable Deduction Details
In general, if you contribute cash, property or marketable securities to a non-profit charitable organization — or a 501(c)(3) organization — you can deduct the amount of these contributions on your tax return. A wide range of different kinds of non-profits may qualify as 501(c)(3) organizations, including most religious institutions and well-known non-profits like the Salvation Army and the United Way.
Here are a few things you should keep in mind about making tax-deductible charitable contributions:
- Your total charitable deductions may be reduced by how much money you make. These adjusted gross income (AGI) limits are $259,400 if you’re single or $311,300 if you’re married and file your income tax return jointly.
- In general, you cannot claim more than 50 percent of your AGI in annual charitable deductions (or more than 20 percent or 30 percent of your AGI for certain kinds of donations and/or charities).
- You must itemize deductions using Schedule A (Form 1040) on your tax return in order to deduct charitable contributions. If you claim the standard deduction, you will not be able to deduct charitable donations.
- December 31, 2017, is the firm deadline for making contributions that can be deducted on your 2017 tax return. If you make a charitable donation on January 1, 2018, you will have to wait until next year to claim it as a deduction.
- You must subtract the value of goods or services you receive (if any) from the charitable organization when you calculate your deduction. If you received a gift valued at $100, for example, in exchange for a $200 donation, your deduction would be $100, not $200.
It’s critical to keep good records if you intend to deduct charitable contributions on your tax return. If you are ever audited by the IRS, you may need these records to substantiate your donations. Here are some guidelines to keep in mind when it comes to charitable donation recordkeeping:
- For cash contributions of less than $250, obtain a cancelled check, bank or credit card statement, receipt or some other written record of the donation from the charity. It should list the name of the charity and the date and amount of the donation.
- For cash contributions of $250 or more, obtain a contemporaneous written acknowledgement of the donation from the charity, also listing the name of the charity and the date and amount of the donation.
- For non-cash contributions worth less than $250, obtain a receipt listing the name of the charity, description of the asset, and the date and location of the donation. If non-cash assets are worth between $250 and $500, you should obtain a contemporaneous written acknowledgement listing the same information.
- For non-cash contributions worth between $500 and $5,000, obtain an acknowledgement describing how and when you obtained the asset and its cost or other basis.
- For non-cash contributions worth more than $5,000, obtain a qualified appraisal of the property and file this with your return, along with the acknowledgement and IRS Form 8283.
Detailed and Complex Rules
The IRS rules for deducting charitable contributions can get detailed and complex, so you should talk to your tax advisor for more details. IRS Publication 526, which you can download here, also includes many helpful details.
Please let us know if you have more questions about the tax benefits of making charitable contributions.