Charitable Donations That Can Be Claimed On Income Taxes

Charitable contributions can and do lower taxable income if deducted correctly. The Department of the Treasury, Internal Revenue Service has been legislated through Title 26, section 170 of the IRS code to allow for specific charitable contributions to be tax deductible. This article will discuss the types of tax deductions that are possible through charitable donations in addition to required tax forms, approved recipients of charity, and a key points in the federal tax code as they pertain to tax deductibility of charitable donations.

Tax deductible donations and programs

It is important to note receipts and records can verify both the accuracy and price of donations. Receipts indicating the name of the organization donated to are required for donations higher than $250.00. Furthermore, for certain property, appraisals and estimates of fair market value must be submitted to the Internal Revenue Service to validate the claimed deductible amount. A few of the listed tax deductible items allowed by the U.S. Internal Revenue Service are the following:

• Books, Art and Jewelry: May be subject to an appraisal requirement.
• Clothing: Must be in condition or better to qualify for deduction.
• Stocks and Inventory: Recorded at "Fair Market Value" or lower.
• Money: Detailed records must be kept, a form 8283 is not required for cash donations.
• Vehicles: Personal or private use vehicles including boats and planes.
• Real estate: Cannot be deductible beyond market value i.e. inflated cost.

There are more ways to receive charitable tax deduction that giving way used property or cash. That is to say, in addition to more typical donations are a few less known charitable programs and laws that make possible more creative ways to save money on taxes. Three of these programs and/or applicable donations are illustrated below:

Charitable leave donation program

This program allows working individuals to deduct paid time off from employment if the funds that otherwise would have been paid to the employee are donated to a "tax-exempt organization that provides relief for victims of hurricane Katrina." (www.irs.gov). Depending on how much time one contributes this could range from tens of dollars to thousands of dollars and is consequently a significant income tax reduction opportunity.

Organ donation and recovery improvement act

A federal law enacted in 2004 that allows states to legislate tax deductibility of expenses related to organ donation tax deductible. Several states have allowed for up to $10,000.00 to be tax deductible in relation to travel, accommodation and time away from work. In some cases the deductions are reserved for State employees.

"Qualified Conservation Contributions" (Form 8283 Instructions): Property related donations that are made specifically for purposes of conservation qualify as "conservation contributions" 1) must be made to organizations capable of carrying out the conservation effort, 2) can only be recorded at fair market value or lower and 3 )must be to a qualifying organization.

Tax forms

As with other aspects of tax filing, charitable contributions hold no exception and require documentation. The following forms are not all required but do provide additional information that may be helpful in researching and understanding the dynamics, and IRS guidelines regarding charitable donations in greater detail.

• IRS Form 8283: Non-cash charitable contributions form for donations over $500.00
• Form 1040: Schedule A, Lines 16-19: Itemized (charitable) deductions
• Receipts, and records indicating organizations, value and date
• IRS Publication 526 "Charitable contributions"
• IRS Publication 557: "Tax Exempt status for your organization"

IRS approved organizations

Generally, tax deductibility of charitable contributions must be made to specific types of organizations, foundations, government entities or businesses. In most cases these organizations are not operated for profit and/or consist of religious foundations, social services, and public investment. A list of organizations that may qualify for charitable contributions include the following:

• Churches or "a convention or association of churches" (Title 26, Section 170)
• Medical facilities that do not operate for profit.
• Tax exempt organizations classified as 501(3)(c) i.e. not for profit.
• Social and public development government affiliated entities
• Private Foundations that operate as non-profit organizations.

Federal tax code highlights: Title 26, Section 170

The federal tax code illustrates in legalese, the types of allowable charity, organizations to which organizations can be made, amounts of contributions that can be made in addition to valuation criteria and special rules applying to the conduct of charitable donations. These rules and regulations include business and corporate definition of charitable contributions and the rules applying to such. A few main points made within the tax code are subsequently provided and detailed:

• Tax year: The time period in which donations must be made to be eligible for tax deductibility is within the tax year for which taxes forms are being filed.

• Future property donations: Cannot be deducted until exchange of property has taken place.

• Capital gains contributions: Limitations to capital gains donated should amount to no more than 30% of total charitable donations.

• Maximum Charitable Contribution: Contributions in excess of "contribution base" i.e.. more than the allowable amount can be carried over and applied in subsequent tax years.

Charitable contribution recapitulation

To recap, charitable contributions are a means by which taxable income can be reduced. In order to qualify as tax deductible, certain pre-requisites and IRS mandated rules must be followed. Specifically, donations should be accounted for properly, be made to "eligible" recipients, and comply with federally legislation i.e. Title 26, Section 170 of the Department of the Treasury tax code.

When in doubt about the recording of, qualification of or procedure for filing charitable donations with the IRS, specifically trained IRS representatives may be available during business hours to answer questions at 1-866-829-1040. In other cases, tax preparation professionals or accountants may provide additional knowledge and instruction into the process.

If a tax filer has a high enough dollar amount in itemized deductions, the advantages of charitable contributions can be realized by 1) potentially lowering a tax filers tax bracket, 2) in the carrying over of tax returns to a subsequent year, 3) exceeding the standard deduction amount for the tax filers tax filing status and 3) in realizing a lower if not a zero tax amount or tax return.

Sources:

1. http://www.law.cornell.edu/uscode/26/170(c)..html
2. http://www.irs.gov/charities/charitable/article/0,id=149949,00.html
3. http://www.ehow.com/how_13124_save-money-taxes.html
4. http://www.irs.gov/pub/irs-pdf/i8283.pdf
5. http://www.ehow.com/how_13124_save-money-taxes.html