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AdminBooks Newsletter

When You Give a Gift to Charity...Chances are....

Renee Daggett - Wednesday, November 08, 2017

Did you know that you may be able to reduce your taxable income by donating cash or goods to a “qualified charity”? Giving your neighbor or family member money to help them cover bills in a challenging economy does not qualify. But any amount you give to a “qualified” organization does!

Some examples of qualified organizations include:
•Churches, synagogues
•Non-profit schools and hospitals
•Veteran’s groups
•Salvation Army, Red Cross
•Boy Scouts, Girl Scouts

Donating from business accounts:
When you give from your business, the donation is handled differently based upon the entity. Here are some examples of how the gift is deducted:

•Sole proprietor: Deducted on Schedule A of personal return
•LLC: Deducted on Schedule A of personal return
•S-Corp: Donation is NOT deductible by the business, but on the personal return.
•C-Corp: Donation is deductible on the business return, up to 10% of the net profits. Any non-deductible portion will roll forward to the next year.

Donating in which you received something in return:
When you give money and get something in return, the value of what you received is NOT deductible. For example, have you given money to participate in a golf tournament that raises money for a charity? If so, only a portion of the fee is deductible. Have you attended a charity dinner to donate money for an important issue? If so, only a portion of the money you gave is deductible, and it does not include the cost of the dinner. Have you given money to an organization - like the Monterey Bay Aquarium - and received admission tickets as a thank you? If so, only a portion of your gift is deductible.

Limitations on gifts:
Generally, you can give up to 50% of your earned income (30% for some items). If you give more than that, any non-deductible gifts will carry forward to the next year. This carryover is good until used or as many as five years, but not beyond that time.

Some examples of gifts that are NOT deductible:
•Civic league donations
•Political donations
•Social or Sports club donations
•Country club, fraternal group donations
•Raffles, bingo and lottery tickets

Cash/Check Donations:
You must show proof amount for any cash donations you give. This proof can be a cancelled check, bank or credit card statement. Gifts of $5 in an offering basket at church are not deductible unless the organization reports the donation. When you give a gift of $250 or more, you are required to get a receipt from the charity showing the amount and date of contribution. No receipt = no deduction.

Non-Cash or Tangible Donations:
Examples of non-cash donations include household items, furniture, appliances, electronics, stocks, etc. Food, paintings, jewelry, or antiques do not qualify.

One of the biggest changes in the non-cash area of contributions is that the IRS noticed that taxpayers were dumping off their “junk” and taking a donation for it. The IRS says that the items you give away MUST be in “good condition” or better. And, you are required to have proof of the donation with a receipt. Some taxpayers will take photos of their items before they drop them off to the charity.

If your total non-cash donations exceed $500, you are required to file an additional tax form 8283 stating the date, items donated, charity name, address and value of the donation.

Charitable miles driven:
Do you use your vehicle for charity purposes? Did you know you can deduct 14 cents per mile for any charitable miles driven?

Donating your time:
People often ask, “How much can I deduct for donating my time to charity?” One person might value their time at $50 per hour, another at $150 and another at $250. An attorney donated his time to sit on a charitable board of directors. He valued his time at $19,000 of billable time spent. However, it might surprise you that the IRS does NOT allow any deduction for your time.

Donating a Vehicle:
In years past, the value of a vehicle that you donated to charity would be entered on your tax return. That rule changed a few years back. Now, the charity sends you a notice stating the amount they sold it for, which you may take as a deduction.

You can read more details from IRS’ publication 526 at: http://www.irs.gov/pub/irs-pdf/p526.pdf.

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