“Tax Cuts and Jobs Act” signed into law on December 22, 2017 by the president, (P.L. 115-97), increases the limitation on deductions to public charities from 50% to 60% of AGI beginning January 1, 2018.
But beware, due to an increase in the standard deduction and reductions in deductions allow for taxes and mortgage interest along with the complete removal of miscellaneous itemized deductions it will be harder for tax payers to itemize. You must itemize to receive any benefit from charitable deductions.
Verify Before You Donate
Be sure to check the IRS list of approved charities when making or deducting contributions that are not to religious organizations and or government organizations. A list of exempt organizations approved by the IRS can be found at www.irs.gov/charities-non-profits/exempt-organizations-select-check.
Some charities do a better job spending and managing the money they receive on their charitable mission than others. Remember a part of every dollar they receive goes to things like fund raising, administration and overhead. What’s left goes toward the charitable mission. Check them out on Charity Navigator.
One of the most commonly known tax deductions is a charitable contribution. But how do you know if what you gave last year can be classified as a Deductible Contribution?
Here are some guidelines:
Deductible Contributions consist of money or property given to:
♦ Religious Organizations
♦ Federal, state, and local governments for public purposes
♦ Nonprofit schools, hospitals, and volunteer fire companies
♦ Public parks and recreation facilities
♦ Salvation Army, Red Cross, Goodwill, United Way, Boys/Girls Clubs
♦ Public Charities on IRS Exempt Organizations list
You can also get limited deductions for:
♦ Charitable Travel
♦ Housing an Exchange Student
♦ Being a Foster Parent
♦ Website Rebates
Nondeductible Contributions include money or property given to:
♦ Civic leagues, social and sport clubs, labor unions, and chambers of commerce
♦ Groups run for personal profit
♦ Political groups, political candidates, or lobbyists
♦ Homeowners’ Associations
You will not get a charitable deduction for:
♦ Lottery Tickets
♦ Dues, fees, bills paid to country clubs or fraternal orders or similar groups
♦ College Tuition
♦ Private/Parochial School Tuition
♦ Value of donated blood
♦ Value of time or service
There are limits and certain requirements for cash and noncash contributions.
Note: The deduction for charitable contributions cannot exceed 50% of your Adjusted Gross Income.
Cash Donation Requirements:
♦ You gave less than $250
To prove your contribution you will need a canceled check or account statement, receipt or a written record with the date, organization, and donation amount.
♦ You gave $250 or more
You will need a written substantiation from the organization
Note: If you made a contribution to an organization that provides a benefit to donors (ex: a donors dinner-dance), your charitable deduction is limited to the amount of your donation less the fair market value of the benefits.
Noncash Donation Requirements:
♦ You gave items worth less than $250
A receipt is not required where it is impractical to get one (ie: a drop box). Still, keep a personal log of the name of the organization, date, location of contribution along with a detailed description and value of items. This brochure contains a sample log.
♦ Item is worth $250 to $500
You will need a written acknowledgement from the charitable organization.
♦ Item is worth $501 to $5000
You will need a written acknowledgement from the charitable organization along with proof of how you acquired the property.
♦ Item is worth more than $5000
You will need a written acknowledgement from the charitable organization, proof of how you acquired the property, and a written appraisal of the property.
The value of household goods donated to a charity is based on their fare market value when donated. For most items this amounts to the value of the item in in current condition if purchased in a thrift shop. For a list common thrift shop item values and a worksheet to record contributions click here to download the attached brochure.