DEDUCT YOUR CONTRIBUTIONS

 
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Posted On : 26th Nov 2010

DEDUCT YOUR CONTRIBUTIONS

IMPORTANT CHANGES!

New recordkeeping requirements for cash contributions. You cannot deduct a cash contribution, regardless of the amount, unless you keep as a record of the contribution a bank record (such as a canceled check, a bank copy of a canceled check, or a bank statement containing the name of the charity, the date, and the amount) or a written communication from the charity. The written communication must include the name of the charity, date of the contribution, and amount of the contribution.

TYPE OF QUALIFIED ORGANIZATIONS:

Generally, only the five following types of organizations can be qualified organizations.

  1. A community chest, corporation, trust, fund, or foundation organized or created in or under the laws of the United States, any state, the District of Columbia, or any possession of the United States (including Puerto Rico). It must be organized and operated only for one or more of the following purposes.

    1. Religious.

    2. Charitable.

    3. Educational.

    4. Scientific.

    5. Literary.

    6. The prevention of cruelty to children or animals.

  2. War veterans' organizations, including posts, auxiliaries, trusts, or foundations, organized in the United States or any of its possessions.
  3. omestic fraternal societies, orders, and associations operating under the lodge system.

    Note. Your contribution to this type of organization is deductible only if it is to be used solely for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals.

  4. Certain nonprofit cemetery companies or corporations.

    Note. Your contribution to this type of organization is not deductible if it can be used for the care of a specific lot or mausoleum crypt.

  5. The United States or any state, the District of Columbia, a U.S. possession (including Puerto Rico), a political subdivision of a state or U.S. possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions.

    Note. To be deductible, your contribution to this type of organization must be made solely for public purposes

Certain foreign charitable organizations. Under income tax treaties with Canada, Israel, and Mexico, you may be able to deduct contributions to certain Canadian, Israeli, or Mexican charitable organizations. Generally, you must have income from sources in that country. For additional information on the deduction of contributions to Canadian charities, see Publication 597, Information on the United States-Canada Income Tax Treaty. If you need more information on how to figure your contribution to Mexican and Israeli charities,

CONTRIBUTION YOU CAN DEDUCT:

Generally, you can deduct your contributions of money or property that you make to, or for the use of, a qualified organization. A gift or contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement.

If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. Your deduction for charitable contributions is generally limited to 50% of your adjusted gross income, but in some cases 20% and 30% limits may apply..

Contributions From Which You Benefit. If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive.

If you pay more than fair market value to a qualified organization for merchandise, goods, or services, the amount you pay that is more than the value of the item can be a charitable contribution. For the excess amount to qualify, you must pay it with the intent to make a charitable contribution.

CONTRIBUTIONS YOU CANNOT DEDUCT:

There are some contributions you cannot deduct, such as those made to specific individuals and those made to nonqualified organizations.

Contributions to Individuals

You cannot deduct contributions to specific individuals, including the following.

  • Contributions to fraternal societies made for the purpose of paying medical or burial expenses of deceased members.

  • Contributions to individuals who are needy or worthy. This includes contributions to a qualified organization if you indicate that your contribution is for a specific person. But you can deduct a contribution that you give to a qualified organization that in turn helps needy or worthy individuals if you do not indicate that your contribution is for a specific person.

  • Payments to a member of the clergy that can be spent as he or she wishes, such as for personal expenses.

  • Expenses you paid for another person who provided services to a qualified organization.

    Example. Your son does missionary work. You pay his expenses. You cannot claim a deduction for your son's unreimbursed expenses related to his contribution of services.

  • Payments to a hospital that are for a specific patient's care or for services for a specific patient. You cannot deduct these payments even if the hospital is operated by a city, a state, or other qualified organization.

Contributions to Nonqualified Organizations

You cannot deduct contributions to organizations that are not qualified to receive tax-deductible contributions, including the following.

  1. Certain state bar associations if:

    1. The state bar is not a political subdivision of a state,

    2. The bar has private, as well as public, purposes, such as promoting the professional interests of members, and

    3. Your contribution is unrestricted and can be used for private purposes.

  2. Chambers of commerce and other business leagues or organizations.

  3. Civic leagues and associations.

  4. Communist organizations.

  5. Country clubs and other social clubs.

  6. Foreign organizations other than:

    1. A U.S. organization that transfers funds to a charitable foreign organization if the U.S. organization controls the use of the funds or if the foreign organization is only an administrative arm of the U.S. organization, or

    2. Certain Canadian, Israeli, or Mexican charitable organizations.

  7. Homeowners' associations.

  8. Labor unions

  9. Political organizations and candidates.

CONTRIBUTION OF PROPERTY

If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. However, if the property has increased in value, you may have to make some adjustments to the amount of your deduction.

Clothing and household items.  You cannot take a deduction for clothing or household items you donate unless the clothing or household items are in good used condition or better.

Household items.   Household items include:

  • Furniture,

  • Furnishings,

  • Electronics,

  • Appliances,

  • Linens, and

  • Other similar items.

          

  Household items do not include:

          

  • Food,

  • Paintings, antiques, and other objects of art,

  • Jewelry and gems, and

  • Collections.

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