There are three basic types of tax-deductible charitable contributions:
Money: You can write a check or make a cash contribution to an eligible charity. If you receive goods or services for your cash donation, you must subtract the value of these goods or services from your donation. The result is the amount you can write off. For example, if you go to a fundraising benefit and receive a voucher for a free massage in exchange for your donation, you must subtract the value of the massage from the value of the donation you make.
Items: Clothing, vehicles and furniture are donations of items. You can write off the value of these items on your tax return. When you want to write off over $500 in items, you must include IRS Form 8283 "Noncash Charitable Contributions" with your tax return.
If an item is worth $250 or more, you must get a receipt or similar documentation that shows the value of the item. If an item is worth $500 or more, you must have an appraiser come out to appraise the item. The appraiser must meet certain IRS qualifications.
Donating junk, torn-up clothes and other ruined goods will not get you a tax deduction. Shoot a picture of your donation to record its condition, especially if it's worth over $500. Remember -- the burden of proof is on you.
The IRS has become increasingly alert about vehicle donations. Usually, used vehicles aren't sold at fair market value, but many donors try to claim the fair market value for their deduction when they donate a car. Unless the organization simply keeps the car for its own use -- or spiffs it up to fair market condition -- you should be wary of writing off the fair market value of a vehicle. You can, however, write off the amount of money the charity receives if it sells the car.
Volunteer Work: To deduct charitable volunteer work, you have to incur expenses while doing the work. For example, if you buy materials to make posters to decorate the charity's main office, you can write off the value of the materials you buy. Or, if you shuttle people in your own car as part of your volunteer service, you can write off your travel expenses.
To learn more about charitable contributions, volunteering and related topics, follow the links below.
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More Great Links
- BBB Wise Giving Alliance. "Tips on Tax Deductions for Charitable Contributions." http://www.give.org/tips/tax.asp#501c3 (Accessed 4/25/08)
- Bell, Kay. "Legitimate ways to reduce your tax bill." Bankrate. 12/17/07. http://www.bankrate.com/cnbc/news/Financial_Literacy/Dec07_tax_deductions_a3.asp?caret=78b (Accessed 4/24/08)
- Charity Navigator. "Reduce Your 2007 Tax Bill." 3/1/08. http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=725&gclid=COnWvbLbipICFQsJPQodyk6LEQ (Accessed 4/25/08)
- Ebeling, Ashlea. "Charitable Changes." Forbes. 1/26/07. http://www.forbes.com/taxesandestates/2007/01/26/charitable-tax-ppa-pf-ii-in_ae_0126taxspecial_inl.html (Accessed 4/25/08)
- Feigenbaum, Alan. "Benefits from Giving." 6/18/07. http://www.forbes.com/investoreducation/2007/06/18/donations-charity-taxes-pf-education-in_af_0618soapbox_inl.html (Accessed 4/25/08)
- Free Advice. "Can I deduct charitable contributions?" http://law.freeadvice.com/tax_law/income_tax_law/charitable_contribution_deductions.htm (Accessed 4/25/08)
- H&R Block. "Overlooked Credits & Deductions." http://www.hrblock.com/taxes/tax_tips/deductions_credits/overpayingtaxes.html?ttiptitle=Overlooked%20Credits%20%26%20Deductions (Accessed 4/25/08)
- H&R Block. "Tips from H&R Block." http://www.hrblock.com/taxes/tax_tips/deductions_credits/overlooked_deductions.html (Accessed 4/25/08)
- IRS. "New Rules May Impact Your Charitable Contributions." http://www.irs.gov/newsroom/article/0,,id=172936,00.html (Accessed 4/25/08)
- IRS. "Tips for Deducting Charitable Contributions." http://www.irs.gov/newsroom/article/0,,id=106990,00.html (Accessed 4/26/08)
- McCormally, Kevin. "The 13 Most Overlooked Tax Deductions." Kiplinger. 12/07. http://www.kiplinger.com/features/archives/2007/01/deductions.html (Accessed 4/24/08)
- Wang, Penelope. "Charitable giving: Leverage your giving." Money Magazine. 12/22/04. http://money.cnn.com/2004/12/22/pf/poverty_giving5_0412/index.htm (Accessed 4/25/08)