Donation Tax Law

According to donation tax law, donations to charity are classified as tax-deductible expenses. Apart from minimizing your taxable income, these donations can also reduce your tax bill. Not every individual can deduct their charitable contributions, though. If you are interested in claiming any charity, you have to itemize your tax deductions. To claim the charity deduction, you need to fill out the 1040form.

The following is the eligibility criteria for claiming the charitable contribution deduction :

• You must actually have donated some value of property or cash.
• It is of paramount importance that you contribute to an organization which is qualified as tax exempt. It is the responsibility of charities to let you know whether they have 501 (c) (3) status or not. Religious organizations do not need 501 (c) (3) status.
• Itemization is necessary if you want to claim the charitable contribution deduction. In terms of a tax planning strategy, giving to charity is quite a good move, but it will only work if you are eligible to itemize your deductions.
• In order to claim the charitable contribution deduction, you need to satisfy record keeping requirements. This includes, donated property appraisals, canceled checks and acknowledgment letters from the charity.

Record Keeping

As a taxpayer, you need to keep excellent records of your charitable contributions. According to the Pension Protection Act of 2006, it is mandatory for taxpayers to keep written records of all cash donations. Tax deductions for donations of $250 or more are not allowed unless you have necessary documentation in place. Apart from the charitable organization’s name, your records must also indicate the contribution date and amount donated.

Contributions of property have a much stricter rule compared to the contribution of cash. To start with, you need to substantiate the fair market value of the property you are interested in donating. In addition, you need to keep written acknowledgments that you get from the charity. If your total non-cash contributions is more than $500, you need to submit the IRS Form 8283. You need to get a written acknowledgement from the charitable organization if you want to contribute a car, airplane or truck with a value of more than $500.