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12.03.19

Taxpayers who donate to charity should check out these resources

BY Elena N. O'Leary, CPA

There are various ways one can contribute to charity and also various limits and benefits of doing so.

What charities qualify?

In order to deduct charitable contributions, the recipient charity must be a qualified organization under IRS rules. Accordingly, a taxpayer needs to make sure that the organization of choice is a 501c(3) public charity or private foundation. Publication 78 Data on the IRS website has a list of organizations eligible to receive tax-deductible charitable contributions.

When can a taxpayer deduct charitable contributions?

A taxpayer can only get a tax benefit from claiming charitable contributions if the taxpayer elects to itemize deductions on the federal income tax return.

Generally, a taxpayer would itemize if the combined total of the deductions, which include mortgage interest, state and local tax, charitable donations, medical and dental expenses, exceed the standard deduction (single $12,200; married filing jointly $24,400; head of household $18,350 in 2019).

What are the deduction limitations, valuation and record keeping rules?

Each of the deduction categories listed above has different requirements and limitations on the amount a taxpayer can deduct. The instructions to Schedule A, Itemized Deductions, offers line-by-line directions for taxpayers.

IRS Publication 526, Charitable Contributions explains how much taxpayers can deduct, what records to keep and how to report contributions. It also goes over special rules that apply to donations of certain types of property such as automobiles, inventory and investments that have appreciated in value.

IRS Publication 561, Determining the Value of Donated Property helps to determine the value and thus amount of tax deduction. Generally, you can deduct the fair market value of donated property. If combined value of the donated property exceeds $500, taxpayers must file Form 8283, Noncash Charitable Contributions. The instructions for this form help you complete it.

Additional charitable options for taxpayers over 70 ½

Please note that taxpayers age 70 ½ and older can make a qualified charitable distribution (QCD) from their IRA directly to an eligible charity. Amounts distributed as a QCD can be counted toward satisfying your RMD (required minimum distribution) for the year, up to $100,000, and can also be excluded from your taxable income. This is not the case with a regular withdrawal from an IRA, even if you use the money to make a charitable contribution later on.

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Elena N. O’Leary, CPA

Professional Specialist

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