As taxpayers and accountants alike gear up for busy season, the National Association of Enrolled Agents (NAEA) offers several tax tips on how to make the most of donations.
Here are the key takeaways:
Make sure that the IRS recognizes the selected organization as being tax exempt. Tax professionals can doublecheck this through EO Select Check on the agency’s website. If the organization is eligible, it should be listed.
Charity Navigator evaluates more than 9,000 charities, according to the NAEA. The site also lists charities that help people affected by the spate of recent natural disasters nationwide, and there are specific links for Puerto Rico and other areas affected by Hurricane Maria, the wildfires in California, and areas hit by hurricanes Irma and Harvey.
Charitable contributions require taxpayers to itemize their taxes. Simply taking the standard deduction won’t allow them to cut taxes by the value of their contributions.
Contributions that are only financial without any goods or services involved require a written statement from the charity. The statement needs to show the charity’s name, the date and amount of the contribution. If the contribution is made through payroll deductions, employers must document that through a pay stub or Form W-2.
Charitable organizations that provide pickups from homes must provide receipts. Contributions valued at more than $500 require taxpayers to complete and include Form 8283, Noncash Charitable Contributions with their returns. It’s wise to document and photograph the contributed items.
Taxpayers who buy something to give to a charity can only deduct the difference between the price they paid and the fair market value of the item. Purchases paid with a credit card in 2017 have to count for that year’s tax return even if the taxpayer doesn’t pay the credit card bill until 2018.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.