Charitable Donations and Taxation

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Donations made to tax exempt organizations often qualify as charitable deductions on income tax returns. Donations made to 501(c)(3) organizations such as churches, schools, and charities typically qualify as charitable donations, while donations made to 501(c)(4) organizations such as social groups, sports clubs, political advocacy groups, and retired professionals organizations do not qualify. Note that donations which have a reciprocal benefit do not qualify as a charitable deduction. For example, purchasing tickets to a fundraising event where prizes are won or meals are served does not qualify as a charitable donation because the donor gains something from the donation.

When making a charitable donation, there must be physical proof of the donation. For a cash donation, this could entail a receipt or statement. Noncash donations, on the other hand, come with more restrictions and specifications for income tax purposes. Noncash donations worth less than $250 only require a receipt, which should be kept when filing. Noncash donations worth between $250 and $500 require a written letter from the charitable organization acknowledging the donation; this letter must be received by the tax filing date. Noncash donations worth between $500 and $5,000 require the acknowledgement letter noted previously as well as more detailed information about the donation such as evidence of ownership, value, cost, and date of acquisition. Additionally, IRS Form 8283 must be filed.

Noncash donations worth more than $5,000 require the previously listed letter and information, as well as evidence of an appraisal of value.

Noncash donations such as clothing, furniture, and electronics can only be claimed if the items are in good condition. Though the IRS does not define the criteria for an item in good condition, most charitable organizations have guidelines for what can be accepted. Items in poor condition can be donated and claimed if they have a value of $500 or more. For example, antique furniture of value can be donated and claimed, even if it is in poor condition.

Noncash donations of vehicles, boats, and planes can be filed, but face certain restrictions on item value. If the charitable organization sells the item, the sum it sells for is the amount which can be deducted. However, if the item is instead used by the charitable organization, the market value of the vehicle can be deducted.

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