What You Need to Know About Charitable Donations and Your Taxes
For the 2018 tax year, one of the biggest changes was that the standard deduction increased. This means that for many more people than before, there will not be a need to itemize deductions. But, what does that mean for charitable donations and your taxes?
However, there are still cases in which it makes sense – and will benefit you more financially – to itemize. Medical expenses are one area that may make itemization worthwhile; another big one is charitable contributions.
What are charitable donations?
For the purposes of the IRS, a charitable contribution or charitable donation is the gift of cash, checks or items to a charity or nonprofit organization approved to receive tax-deductible contributions. The IRS offers a site where you can search by name; however, some organizations that are approved, such as churches, do not appear on the list but may still be eligible.
Note that while you can deduct the fair market value of any items donated, the IRS does not recognize “time” as a charitable contribution, so volunteer efforts are not part of the potential contribution. However, any unreimbursed expenses you incur for volunteering, including uniforms and mileage when not paid by the sponsoring organization, can be deducted.
Also, donations to individuals are not considered deductible for tax purposes. This includes almost all campaigns through sites such as GoFundMe; rarely are those donations considered tax-deductible, as they are considered personal gifts, not charitable donations.
How do I determine the value of donated goods?
For donations of household items or clothing, the item must be in “good” or better condition in order for its value to be deductible. The IRS says that you can deduct a fair market value for your used goods. Goodwill offers a simple calculator that might be helpful for such donations; note that the IRS offers a lot of detailed advice in Publication 561, but that focuses mainly on larger-value donations.
When assigning a value of up to $500 for your donation, no appraisal is required. If you are donating something more substantial, like a car, use that IRS Publication 561 to find out how to accurately determine the value.
If you make non-cash contributions with a value of more than $500, you must use IRS Form 8283 in addition to your Schedule A of itemized deductions with your 1040.
What charitable donation documentation do I need to file my taxes?
For check contributions, you should have either a bank record or a letter from the organization containing the organization’s name and the amount and date of the donation.
For cash or item donations, you should have a letter from the organization containing the amount of the cash and/or a description of any property contributed. When donating to most thrift-store organizations, you can ask for a receipt on which you’ll fill in your estimated value, and the thrift-store employee or volunteer will confirm the donation. Most stores will not help you assign value to your items; they will simply confirm receipt of them.
If the organization provided any goods or services in exchange for your gift, that organization must provide a description and a good-faith estimate of the value of those goods or services, and only the amount you contributed above that value is deductible.
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This information is not intended as legal or tax advice. Cowdery Tax and its representatives does not offer legal or tax advice. We offer services for business bookkeeping, payroll, tax payments, and personal tax filings. We share information that is publicly available. Tax laws may change with or without notice that may alter or change the information contained in this publication.
