End-of-year tax tips for your charitable contributions
With the new year – and the new tax year – just days away, many of us are ready to get a head start on our 2015 tax filings. With that in mind, here are a few tips for maximizing the tax benefits available to you for your charitable gifts from 2016:
To claim your charitable gift, you must itemize your deductions on Schedule A. To receive the full benefit, make sure your total deductions will be greater than the standard deduction rate.
Don’t forget about payroll contributions
Have you been making automatic payroll contributions through a workplace campaign? Don’t forget to include these in your 2016 charitable gifts at tax-time. Your paystub including the final pay period of 2016 will include total amount you contributed through your employer in 2016.
Keep proof of your gifts
You must keep written acknowledgement from the charity that shows the date and value of the donation for cash or property worth more than $250.
Clothing or household items must be in good shape
Second-hand clothes and household items must be in at least “good used condition,” and you can only deduct the value they would sell for in a thrift shop, not what you paid for them.
Fill out form 8382
You must fill out IRS Form 8382 when you deduct gifts of items worth more than $500.
Get an independent appraisal when giving valuable property
For gifts of furniture, jewelry or other items worth more than $5,000, the IRS requires independent verification of its value.
Make sure you know the rules
There are a few special restrictions that the IRS places on deductions for charitable gifts. Here are some of the key ones to know:
- Gifts of financial assets held one year or less
You can deduct the amount paid for a stock or other security, but you can’t deduct any appreciation. In fact, you have to list the gain on your tax return.
- A donation for which you got something in return
For example, if you buy something at a charity auction, you can only deduct the amount you paid over the item’s value.
- Gifts to non-qualified organizations
Some nonprofits aren’t eligible to receive deductible contributions – for example because they urge people to vote for a particular political candidate. IRS publication 78 lists the charities to which you can make deductible donations.
- The gifts make up a large percentage of your income
You can deduct cash contributions in full up to 50 percent of your annual gross income, donations of property up to 30 percent of your annual gross income and appreciated long-term securities worth up to 20 percent of your annual gross income. Anything in excess of these amounts can be carried forward to the next tax year, for a maximum of five years.
- Gifts of vehicles
The IRS only allows you to deduct the charity’s actual selling price and requires you to attach a statement of sale to the tax return. If the charity uses your car rather than selling it, you can deduct the vehicle’s fair market value.
Charitable gifts claimed on your 2016 tax filing generally must be made by December 31, 2016
If you haven’t made your charitable contributions yet, you still have a few days left to reduce your tax burden for 2016. Consider maximizing your charitable impact while maximizing your tax benefits by making your charitable gift today to United Way of Williamson County’s Community Impact Fund.
*Always be sure to consult with your tax advisor on eligibility for specific deductions. If your family earned $64,000 or less during 2016, visit one of our Free Tax Prep (VITA) sites beginning in January for help from a trained volunteer.