Timing your deduction. To receive a deduction for 2015, your charitable contribution must be paid to a qualified charity by December 31, 2015. You still qualify for the deduction if you charge it on a credit card by 12/31, even if you do not pay the credit card bill until 2016.
Qualified Charity. Is your charity qualified? Make sure you ask your favorite charitable organization about its tax-exempt status. You can also visit IRS.gov for a list of qualified organizations. Unfortunately, giving cash directly to the homeless or friends and family that have fallen on dark days does not count.
Documentation. You must document all charitable contributions using cash or check. Acceptable documentation includes a cancelled check, credit card statement, payroll deduction record, or a written acknowledgement from the charity. If your contribution is $250 or more, you must obtain a written acknowledgement from the charitable organization.
Limitation for Benefits Received. If you receive a benefit such as merchandise, tickets to an event or a dinner, you can only deduct the amount that your cash donation exceeds the fair market value of the benefit received.
Non-Cash Contributions. Property donated is usually valued at the fair market value of the property, which is generally defined by the IRS as the price at which the property would change hands between a willing buyer and a willing seller. If your deduction is greater than $500, you must complete Form 8283 and show how the property was acquired, the date of acquisition, and the adjusted basis of the property. For deductions more than $5,000, most contributions will require a written appraisal by a qualified appraiser or valuation analyst.
Donating Your Time or Services. Using your time and skills to help charitable organizations is an honorable thing to do, however, you cannot receive a deduction for the value of your personal time or services. However, you are able to deduct any out-of-pocket expenses that directly benefit the charity such as supplies and travel costs (mileage rate of 14 cents per mile).
Gifting. Giving a gift to family members can be a great strategy for estate tax planning, but it has nothing to do with charitable deductions for your income tax returns. Current rules allow you to give up to $14,000 a year to as many people as you choose ($28,000 if you and your spouse both make gifts) to help reduce your federal gift and estate taxes.
We know that the rules related to charitable giving can be cumbersome. The list above only provides general guidance on substantiating a limited number of deduction types. If you are unsure as to whether or not the information you possess is sufficient to substantiate a deduction, please work with a reputable and experienced financial advisor or Certified Public Accountant. We at Sullivan Strategic are always happy to help!
Wishing you and your family a Happy Thanksgiving and upcoming holiday season!