Charitable IRS Deduction Tax Tips

You have done a great thing by donating to your favorite charity. You are helping others in desperate need of help. You feel good about the donation. On top of it all, you can deduct the donation on your IRS tax return. Here are 5 tax tips for deducting  charitable contributions on your IRS tax return.

Tax Tip #1: Keep Proper Records

We recommend placing proof of donations made in a folder kept in a safe place. For cash donations less than $250, keep bank records, cancelled checks, receipts, or credit card statements. For cash donations greater than $500, you must keep a record of the donation and obtain a letter from the charity at the end of the year.

For noncash donations of $500 or less, you must keep a receipt. There are additional IRS reporting requirements for noncash donations above $500. Check with your tax adviser for more information.

Tax Tip #2: Travel Expenses while Volunteering May be Deductible

You may be able to deduct travel expenses for volunteering at your local charity. The travel expenses must be directly connected to your volunteering services. Travel expenses may include air or bus transportation, auto expenses, lodging, and meals.

Tax Tip #3: Donated Services are Not Deductible

Business services donated to the charity are not deductible. For example, you are a painter. You agree to paint several rooms as part of a church remodeling project. The value of the labor you provide is not deductible. However, you can deduct the cost of materials such as paint and paint brushes as a charitable contribution.

Tax Tip #4: Confirm IRS Non-Profit Status

This may seem silly to ask. You do not need to confirm the non-profit status of Red Cross, United Way, Salvation Army, or any other known charity organization. But you may want to check the non-profit status of lesser known organizations. Your donation to the organization is deductible only if the organization has established non-profit status with the IRS.

Tax Tip #5: Benefits Received in Return

Your charitable donation must be reduced by any benefits received in return. For example, you attended a charitable dinner. The cost per person is $150. The value of the dinner served is $50 per person. You must reduce your charitable donation by the value of the dinner. Your deductible charitable contribution is $100. (150 – 50 = 100)

IRS Circular 230 Disclosure: To the extent this writing contains advice on a federal tax issue, the advice is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.