After the celebration of Thanksgiving with our families we realize that year-end is around the corner now. This is the time to revise and make your final tax moves for year 2015.
One of the most popular vehicles to lower your tax bill is by donating money or property to charity. If you plan to give and want to claim a tax deduction, there are a few tips you should know before you give.
- Give to qualified charities. You can only deduct gifts you give to a qualified charity. You can also deduct gifts to churches, synagogues, temples, mosques and government agencies.
- Keep a record of all cash gifts. Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.
- Household goods must be in good condition. Household items include furniture, furnishings, electronics, appliances and linens. These items must be in at least good-used condition to claim on your taxes. A deduction claimed of over $500 does not have to meet this standard if you include a qualified appraisal of the item with your tax return.
- Additional records required. You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.
- Year-end gifts. Deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2015. This is true even if you don’t pay the credit card bill until 2016. Also, a check will count for 2015 as long as you mail it in 2015.
- Special rules. Special rules apply if you give a car, boat or airplane to charity. If you claim a deduction of more than $500 for a noncash contribution, you will need to file another form with your tax return. Use Form 8283, Noncash Charitable Contributions to report these gifts.
My main recommendation is to keep good records when you make a donation and to consult with your tax advisor in your specific tax situation.
If you have any question regarding the rules applying to charitable contributions, please call me at (305) 443-1068.
Have a great week!!!
Julio Jiron, CPA