FINANCIALLY SPEAKING: Overlooked Charitable Contributions
We all know that cash contributions to a qualified charitable organization are deductible if you itemize your deductions. But what about noncash contributions? If you volunteer your time for an organization, the value of your services is not deductible but all of your out-of-pocket expenses, including mileage, are deductible. If you drive your vehicle for a charitable purpose, you can deduct 14 cents per mile as a charitable contribution.
Did you clean out your closets and drop off bags of clothing at the local Salvation Army or Goodwill store? For some people they merely throw away the receipts and what may be a substantial tax deduction. The fair market value of those items is a deductible charitable contribution. Many thrift stores are operated by a charitable organization and they often have a listing of what the fair market value is for these items. If they don't have a listing, you can apply any "reasonable" value to your donation. Many people use the price they would place on the items if they were to have a rummage sale. As long as the value is reasonable, the IRS will accept your valuation.
Contributions of property to a charitable organization are allowed to the extent of the property's fair market value as well. For example, you have stock that has appreciated in value over the years- Instead of selling the stock and paying tax on the gain, donate the stock itself. You can take a deduction for the appreciated value on your tax return, provided you limit the deduction to 30% of your adjusted gross income. This rule applies to all capital assets you contribute. The exception is for depreciable assets your business may have contributed. See your tax advisor for further details.
When making a charitable contribution of $250 or more to one qualified charitable organization, you must receive written acknowledgment from the organization before you file your income tax return and claim the deduction. Separate contributions of less than $250 to the same charitable organization do not require written acknowledgment. For items valued at $5,000. and over an appraisal is required.
While it may seem a little time consuming, attach a detailed list of the items you donated to the receipt you receive. Your list should show the approximate original cost, date purchased and the thrift shop value when donated. Add up the valuations and take your deduction. Some of our clients have taken a photograph of the items donated to help prove the value and condition of the donated items.
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