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IRS; Know these Facts Before Deducting a Charitable Donation

posted Mar 22, 2017, 10:25 PM by Zaher Fallahi

If taxpayers gave cash or non-cash goods to a charity in 2016, they may take a deduction on their federal tax return. Taxpayers can use the Interactive Tax Assistant tool, Can I Deduct my Charitable Contributions?, to help determine if their charitable contributions are deductible.


Here are six important facts to know about charitable donations:


1- Qualified Charities

Taxpayers must donate to an IRS approved charity. Gifts to individuals, political organizations or candidates are not deductible. To find out the status of a charity, use the IRS Select Check tool. 


2- Itemize Deductions

To deduct charitable donations, taxpayers must file Form 1040 and itemize deductions on Schedule A, Itemized Deductions, with a federal tax return.


3- Benefit in Return

If taxpayers get something in return for their donation, they may have to reduce the value of their deduction. Taxpayers can only deduct the amount that exceeds the fair market value of the benefit received. Examples of benefits include merchandise, meals, event tickets or other goods and services. 


4- Type of Donation

If taxpayers give non-cash property instead of cash, their deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price they would get if the property sold on the market. If they donate used clothing and household items, those items must be in good condition or better. Special rules apply to cars, boats and other types of property donations. 


5- Noncash Charitable Donations

File Form 8283, to claim Noncash Charitable Contributions, if all noncash gifts are in excess of $500 for the year. Complete section-A for noncash property contributions worth $5,000 or less. Complete section-B for noncash property contributions more than $5,000 and include a qualified appraisal to the return.

Taxpayers may be able to prepare and e-file their tax return for free using IRS Free File. The type of records they must keep depends on the value and type of their contribution. To learn more about what records to keep, see Publication 526, Charitable Contributions. 


6- Donations of $250 or More

If taxpayers donated cash or non-cash goods of $250 or more, they must have a contemporaneous written statement from the charity. It must show the amount of the donation and a description of any property donated. It must also say whether they received any goods or services in exchange for the gift.


Taxpayers should keep a copy of their tax return

Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.


Zaher Fallahi, CPA, Tax attorney, advises taxpayers including Americans-living abroad, with their taxes, IRS representation, foreign accounts (FBAR, FATCA, OVDP, foreign trusts). Telephones (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), or e-mail