Orange County tax attorneys will almost always recommend making charitable donations and deducting them from your taxes. But like everything else with taxes, there are right ways and wrong ways to do it. Avoid problems with the IRS by following their advice on what to know before deducting charitable donations on your 2010 taxes.
The IRS wants every taxpayer to know these ten things before deducting charitable donations:
1. To be deductible, charitable contributions must be made to qualified organizations. Ask the organization whether it is a qualified organization. Most of them will be able to tell you. Also, IRS Publication 78, Cumulative List of Organizations, lists most qualified organizations. IRS Publication 78 is available at IRS.gov.
2. The only way to deduct charitable contributions is to itemize deductions using Form 1040, Schedule A.
3. Some contributions entitle you to receive goods, services or merchandise in return. In these cases you can only deduct the amount that exceeds the fair market value of whatever it was you received.
4. In general, you can deduct your cash contributions and the fair market value of most types of property you donate to a qualified organization. There are special rules that apply to some types of donated property. These include cars, boats, clothing and household items.
5. The contributions have to be made during the tax year. If you pledged $1000 during the year but only paid $750 of it during the year, your contribution is $750, not $1000.
6. If you make a contribution by credit card, the contribution is made during the year the organization receives the donation, not the year you pay the credit card bill.
7. Keep accurate records of any contribution you make, regardless of the amount. If the contribution was made in cash, you must maintain a record of the contribution such as a bank record – including a cancelled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the name of the organization, or a payroll deduction record.
8. If a contribution is $250 or more, you need written acknowledgment from the organization to prove your donation. This written proof must include whether the organization provided any goods or services in exchange for the gift, the amount of cash you donated and a description and good faith estimate of the value of any property you contributed.
9. If you are deducting a contribution of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.
10. If you claim a deduction for a contribution of noncash property worth more than $5,000, you will probably need an appraisal. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.
Source: irs.gov “Ten Tips for Taxpayers Making Charitable Donation” August 23, 2010