What Donations to Claim as Tax Deductions

PRLog (Press Release) - Mar. 16, 2011 - As Americans reach out to help with the Japanese disaster relief, there are some tax considerations to keep in mind. The IRS recognizes the importance of donating to charitable organizations and allows taxpayers to report certain charitable contributions as itemized deductions, but which gifts are tax deductible and what kind of records are needed in order to claim a deduction?

Contributions made to qualified organizations that are religious, charitable, educational, scientific, or literary in purpose are deductible. It is important to verify that the organization’s charitable status. The easiest way to do this is to call or check their website. A receipt is needed for any donation claimed on Schedule A, even the dollar dropped into the red bucket or the text made to the Red Cross. If you do contribute to the Red Cross, keep your cell phone bill in your tax records.

Make note of these nondeductible contributions: clothing or food given directly to victims is not deductible; the items must be given through a charity. Political contributions are never deductible. The value of time is not deductible—even if the work accomplishes something a paid position would otherwise accomplish or if it time off of work was taken.

The most common contributions are cash and checks. Monetary gifts can be made by credit card or payroll deductions. The entire amount of a monetary donation is deductible, provided that nothing of value is received in return. If a benefit is received as a result of a contribution, only the part of the contribution that is greater than the value of what you receive is deductible. Other common donations are property or out-of-pocket expenses paid to do volunteer work. If transportation costs to perform the volunteer work are incurred, the actual cost of gas and oil or the standard rate of 14 cents a mile can be deducted. Add parking and tolls to the amount claimed for either method. Clothing and household items are deductible at its current value, where as food items are deductible at cost.

Noncash contributions require records describing any property donated and the method used to determine its value. The taxpayer is responsible for valuing the property either through appraisal or through comparison to other property. Generally, charitable organizations will only issue a receipt stating the donation was made and will not assign a value. Special rules apply for donated stock, real estate, and other capital assets that would have resulted in capital gains. Please consult a tax professional for guidance.

This article contains general tax information for taxpayers. Each tax situation may be different, so do not rely upon this information as your sole source of authority. Please seek professional advice for all tax situations. Tax professionals are experts who keep current on tax law changes. They can save you time and offer insight on how to use the tax breaks available to you. To find a professional tax preparer, look to NATP whose members subscribe to a strict code of ethics and standards of professional conduct (read them in the Press Room at www.natptax.com). To see NATP’s list of professionals in your area, visit www.natptax.com and click Find a Tax Pro.

Members of the National Association of Tax Professionals (NATP) work at offices that assist over 11 million taxpayers with tax preparation and planning. The average NATP member has been in the tax business for over 20 years and holds a tax/financial designation and/or a college degree. NATP has more than 20,000 members nationwide. Members include individual tax preparers, enrolled agents, certified public accountants, accountants, attorneys, and financial planners. As a nonprofit professional association, NATP serves professionals working in all areas of tax practice through professional tax education, tax research, and tax office supplies. The national headquarters, located in Appleton, WI, employs over 45 staff members. Learn more at www.natptax.com.

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Members of NATP work at offices that assist over 11 million tax payers with preparation and planning. NATP has more than 20,000 members. Members include tax preparers, enrolled agents, certified public accountants, attorneys, and financial planners.