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Reduce Your Income Tax Bill By Claiming Your Charitable Donations

Were you charitable this year?

If so you may be able to claim a deduction on your 2016 federal income tax return. Donations of money or goods by December 31, 2016 made to an eligible organization can cut your tax bill. Please note that if you received something in return for your donation your deduction may be a smaller amount than you had hoped for. Items you may have received in return include goods and services, merchandise, meals, or tickets to an event.

How do I know if I gave to an eligible organization?

Churches, synagogues, temples, mosques and government agencies are all eligible.

If you donated to an organization and you’re not sure if it’s eligible go to Select Check , an IRS database that allows you to search if that place qualifies.

How do I claim my charitable donations?

The only way to claim your charitable donations is by itemizing using  Form 1040 ScheduleA

Monetary Donations vs. Donating Property

Money can be donated by check, electronic funds transfer, credit card and payroll deduction. If a payroll deduction was made the taxpayer needs to include a document from the employer (ie a pay stub, a Form W-2 wage statement) stating the amount withheld for charity. One must also present a pledge card with the name of the charity. In addition, to prove the amount donated a bank record or a written statement from the charity is needed. Bank records include canceled checks as well as credit union and credit card statements.

The deduction amount when donating property in reference to clothing and household items is normally limited to the item’s fair market value. Items included in household donations are furniture, furnishings, electronics, appliances and linens. Clothing and household items must be in good or better condition to be tax-deductible. A taxpayer needs to include a qualified appraisal of an item if he claims a deduction of over $500. Any gift worth $250 or more can only be included if a description of the items is included as well as a written acknowledgement of the donation written by the charity.

Special rules apply to cars, boats and other types of property donations. Many property donations require an additional reporting form and an appraisal is often necessary when larger donations of property are made.

What if I am an IRA owner?

If you are an IRA owner, age 70½ or older, you 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. Details regarding the transfer can be read in Publication 590-B.

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