Charitable Giving and Taxes

Doing good is its own reward, but when you donate to certain causes, Uncle Sam smiles on you by allowing you to take a tax deduction. When you give money to educational foundations, churches, synagogues, veterans organizations and similar eligible groups, you can take that amount as a deduction on your tax return. You can also deduct the value of some non-cash donations, such as used clothing, vehicles or pieces of art.

To get the deductions, you’ll need to follow all the guidelines of the Internal Revenue Service. Here are some tips for handling charitable donations on your taxes:

Gather your receipts

Got all your receipts? You’ll need proof that you donated that cash or property during the year. The IRS accepts documentation such as check stubs, credit card statements or pay stubs showing payroll donations. You can also use thank-you notes or receipts from the organizations you gave to, as long as they state the dates and dollar amounts.

Institutions like Land of Lincoln Credit Union typically provide their members with easy access to past bank statements through online banking accounts, which can help you track your charitable donations.

Estimate values

If you donated goods or property, you can usually deduct the item’s fair market value. For example, if you donate a used coat to Goodwill, you wouldn’t deduct the $300 you originally paid, but the estimated $50 such a coat could sell for now at the thrift shop. For a car, you can often use a published used-car “blue book” price, though you need to consider the condition of the vehicle and adjust the value accordingly. Use the price listed for a private party sale, not a dealer retail value. 

If the value of your non-cash donation was at least $500, you’ll need to fill out Form 8283. For donations exceeding $5,000 in value, you’ll typically need to have the items appraised.

Confirm tax-exempt status

If you’re not positive whether the organization you supported is a tax-exempt charitable organization, you can look it up on the site, using the online Exempt Organizations Select Check tool. (This search tool replaces the old Publication 78 list of tax-exempt organizations, which the IRS no longer publishes).

Limits on deductions

For many taxpayers, there’s little danger of hitting the allowable ceiling on charitable tax deductions. In most cases, IRS rules say you may take charitable deductions worth up to 50% of your adjusted gross income. However, other limits apply to some organizations and types of gifts, such as long-term capital gain property.

If you’re donating anywhere near 30% of your adjusted gross income, refer to the IRS page on charitable contributions deductions for specific limits for other types of foundations and gifts.

As always, when it comes to taxes, careful documentation is the best policy. Be sure you have proper supporting material for all your charitable tax deductions and you’ll be able to enjoy both the moral and financial benefits of your good deeds.

Jeanne Lee, NerdWallet

© Copyright 2015 NerdWallet, Inc. All Rights Reserved