As tax season approaches, taxpayers who give money or goods to a charity by Dec. 31, 2016 may be able to claim a deduction on their 2016 federal income tax return and reduce their taxes.
Only donations to eligible organizations are tax-deductible.
Only taxpayers who itemize using Schedule A can claim deductions for charitable contributions. Charitable deductions are not available to individuals who choose the standard deduction or file Form 1040A or 1040EZ.
A bank record or a written statement from the charity is needed to prove the amount of any donation of money. Bank records include canceled checks, and bank, credit union and credit card statements. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
For donations of clothing and other household items, the deduction amount is normally limited to the item’s fair market value. Clothing and household items must be in good or better condition to be tax-deductible.
Donors must get a written acknowledgement from the charity for all gifts worth $250 or more. It must include a description of the items contributed. Special rules apply to cars, boats and other types of property donations.
Donors who get something in return for their donation may have to reduce their deduction. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.
IRA owners, age 70½ or older, can transfer up to $100,000 per year to an eligible charity tax-free. Funds must be transferred directly by the IRA trustee to the eligible charity.