Taking charitable deductions on your tax returns for the donations you make to tax-exempt charities can be an effective way to lower your tax bill. The Internal Revenue Service requires you to retain certain documents that provide information you'll need when preparing your return. These will be needed to document your deductions in the chance your tax return is audited. It is worthwhile to deduct charitable donations only if the total of all your itemized deductions exceeds the amount of any standard deduction you could take.
Receipts and Written Acknowledgments
The IRS doesn't require you to attach documents to your return to substantiate every donation included in your charitable deduction, but it does require you to have all receipts, written acknowledgments and other records, such as canceled checks and credit card statements, readily available. Some charities may issue standard receipts to donors so that they have a record of the donation, though when the value of a single donation reaches $250 or more, the IRS requires charitable organizations to provide you with a written acknowledgment. A written acknowledgment must include certain information, such as the amount of your donation and a statement that notes the benefits you received from the organization, if any, for making the donation.
Non-Cash Property Donation Values
Your charitable deduction is equal to the sum of your cash donations and the fair market value -- the price buyers are willing to pay for an item -- for each non-cash property donation. As a result, figuring out how much of a charitable deduction to take for your non-cash property donations may require more information than is necessary for your cash donations. If you donate home furnishings to the Salvation Army, for example, you may want to access, and retain a copy of, the organization's Donation Value Guide (see Resources) to figure out how much of a charitable deduction you can take for each piece of furniture. For a unique item or one valued at more than $5,000, you may need to obtain value information from an expert or appraiser.
Additional Information for Vehicle Donations
When you donate a used car, special rules apply to the amount you can deduct and the essential information that charities are required to furnish you with. This is because the amount of your charitable deduction for a vehicle donation cannot be more than the price the charity sells it for. If your deduction for the vehicle exceeds $500, the charity must send you a written acknowledgment -- which is often prepared on Form 1098-C -- that has your full name, Social Security number, the vehicle identification number and the sales price. In this case, you must prepare Form 8283 and attach the written acknowledgment to it to include the vehicle donation in your charitable deduction.
Information for Form 8283
Filing Form 8283 with your return is always necessary when the annual total of non-cash donations you intend to claim is more than $500. The information you'll need to prepare the form includes the name and address of each charity you donated property to, a description of the property and, in the case of a vehicle donation, information about the make, model, year and mileage. For each item that's worth more than $500, you'll need to enter additional details, such as the date you acquired the property and its original cost.
Michael Marz has worked in the financial sector since 2002, specializing in wealth and estate planning. After spending six years working for a large investment bank and an accounting firm, Marz is now self-employed as a consultant, focusing on complex estate and gift tax compliance and planning.