Making a donation can be rewarding, even at tax time. You can deduct donations that you make as long as you opt to itemize your taxes when you file your return.
The donations you make must be to a qualified organization, as those contributed to an individual aren’t eligible for deduction. Tax deductible donations must adhere to certain requirements set by the IRS.
You can only deduct the amount of a donation that exceeds the fair market value of anything you received from the person to whom you made the donation to, including exchanged goods or services.
Cash donations or other monetary gifts require written documentation from the party receiving the donation. The receipt should state the date of donation, the amount of money, and the organization or charity’s name on it. Generally, you can deduct the fair market value of any contributions made, however those that are in excess of $250, regardless of whether its cash or goods, require a receipt of acknowledgment that describes the property or lists the amount of cash donated, and should also list anything that was exchanged in accordance with the donation, such as tickets or other merchandise. All the information can be listed on one receipt.
You can use Form 8283, NonCash Charitable contributions, for any noncash deductions that are in excess of $500. Donations between $500 and $5,000, you’ll only need to complete section A. If the donation is greater than $5,000, you’ll have to complete section B additionally and have a qualified appraisal. You must include the tax return for any donated property over $500,000 in value.
Donations that appreciate in value, such as investments or vehicles have special requirements.