May 25, 2016

Don’t Miss Out on Claiming Charitable Donations

The IRS Offers Tips on the Importance of Record-Keeping

Although most taxpayers know that gifts to their preferred charitable organizations are tax deductible, it may come as a surprise when their accountant tells them that they are unable to claim the deduction due to lack of proper documentation. DON’T LET THIS HAPPEN TO YOU! Recently issued by the IRS, “Tax Time Guide: Good Records Key to Claiming Gifts to Charity” provides a series of useful tips. Maddox Thomson shares several of the paper’s important points here.

First, in order to deduct a charitable contribution, the IRS reminds donors that they must obtain a written acknowledgement/receipt from the designated charity. This includes gifts of both cash and property, for all contributions of $250 or more. In the case of property donations, the acknowledgement must include a description of the items contributed. These acknowledgements are not filed with the return but must be retained by the taxpayer.

Second, it is vital for the taxpayer to ensure that the designated organization qualifies as a charity. Only donations to eligible organizations are tax-deductible. To determine if a charity is qualified, visit the online tool, Select Check, or on Additionally, churches, synagogues, temples, mosques and [certain] government agencies are eligible even if they are not listed in the tool’s database.

Third, the IRS reminds taxpayers that contributions are deductible in the year made only. For example, any donations charged before the end of 2015 count for 2015, even if the credit card bill was not paid until 2016. Conversely, if a pledge was made in 2015, but not paid in 2016, that donation would not be deductible until 2016.

Finally, the IRS reiterates the rules for donating money, clothing and household items. For monetary donations, a taxpayer must have a bank record or written communication from the charity. Forms of monetary donations include cash, check; electronic funds transfer, credit card and payroll deduction. Bank records include canceled checks, bank statements and credit card statements. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement, any documents showing the total amount withheld for the charity and the pledge card showing the name of the charity. Clothing and household item donations also include furniture, furnishings, electronics, appliances and linens. These items generally must be in good condition in order to be tax-deductible and the donor should receive written record showing the name of the charity and the date of the contribution.

As always, the Maddox Thomson team stands ready to answer any questions you may have. Supporting worthy causes feels great. And even better when it results in tax benefits.