Rules on Charitable Contributions

Many of us have causes we believe in. For some, we support causes based on deeply personal experiences that have shaped us for better or worse. Others have identified with causes that fit with their belief systems or interests. There are a number of ways that people show their support: with their time, their voices, by volunteering, by fundraising, and significantly, by donating money.

While donations are the lifeblood of non-profit organizations, they can also have significance for taxpayers. This is because charitable contributions are tax deductible. And as with any tax deduction, charitable contribution deductions will open a taxpayer up to scrutiny and adjustments if improperly reported. Keep the following in mind:

  1. Any charitable contributions you intend to claim must be reported in your form 1040.
  2. Must Be to a Qualified Organization. A charitable contribution cannot be deducted unless it is made to a qualified organization. This may include:
  • Contributions to the U.S. government, to states, or to local government for public use.
  • Non-profit organizations registered with the IRS, such as schools and hospitals, the American Cancer Society, the American Red Cross, the Salvation Army, Habitat for Humanity, the Girl Scouts, and the Boy Scouts.
  • Religious organizations, such as churches, temples, mosques, and faith based organizations.
  1. You Are Permitted to Deduct Money and Property Donations. A donation of property can generally be deducted at its fair market value.
  2. You Cannot Benefit from Your Charitable Contribution. For example, if you pay $1000 at a charity silent auction for golf clubs that are regularly priced at $800, then you can deduct a charitable contribution of $200. However, if you had paid $800 or less at the silent auction, you would not be able to claim a charitable contribution.
  3. You can deduct “Out of Pocket in Giving” expenses. This refers to unimbursed expenses directly related to the volunteer services you are providing. Examples of qualifying expenses include gas used for travel, uniforms, money you spend on underprivileged youth for tickets or meals, and travel expenses directly related to charity.
  4. Your charitable deduction must be reported on Form 1040 and itemized on Schedule A. Your deduction cannot exceed 50% of your adjusted gross income and may be further limited to 20% to 30% depending on the type of property and charity you donate to.

A Tax Appeals Attorney Can Help You

If your charitable contribution deduction was rejected by the IRS, you are not alone. Many taxpayers over-report their charitable contributions every year, which means that the IRS takes a harsh view of the deduction. If you believe that the IRS has made a mistake or want to challenge the finding, call me. You have legal rights and I will make the IRS take your claim seriously. Call The Law Offices of Robert S. Thomas at 847-392-5893 for a consultation or visit our website today.

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