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Make the Most of Charitable Contributions by Adam Cohen


Posted on June 02, 2014 by Adam Cohen

Giving to charity helps non-profit agencies carry out their missions and can provide donors with a deduction that reduces their annual taxable income. However, the IRS provides specific rules governing how these charitable contributions can lower individuals’ tax bills depending on the type of donation, its value and the taxpayer’s income.

1. Make donations to qualified charities. The IRS website offers a searchable database at http://apps.irs.gov/app/eos/.

2. Do not deduct contributions made to specific individuals, political organizations and candidates, which are unallowable.

3. File Form 1040 and Schedule A to itemize charitable deductions. Note that the IRS imposes limits on itemized deductions for 2014 when taxpayers’ incomes exceed $305,050 for married couples filing jointly, or $254,200 for individual filers.

4. Obtain a receipt with a description of the donation from the charitable organization for contributions of cash or property exceeding $250.

5. Obtain an appraisal for donations of items valued at more than $5,000 and complete Section B of Form 8283.

6. File Form 8283, Noncash Charitable Contributions, when claiming deductions for all non-cash gifts that exceed $500 in a given year. For C Corporations, Form 8283 must be filed when non-cash donations exceed $5,000, while partnerships and S Corporations must file Form 8283, along with Form 1065, 1065-B, or 1120S, when they make non-cash donations of more than $500.

7. Determine the “fair market value” of donated property, which is the price one would receive when selling the property on the open market. Note that some property will decrease in value while others may appreciate.

8. Keep records that provide proof of donations. These can include a letter from the organization, a bank statement or cancelled check, or a cellular phone bill for donations sent via text.

As of April 1, 2014, the IRS limits charitable contributions to between 20 and 50 percent of a taxpayer’s adjusted gross income (AGI), depending on the type of donation and charity. However, some lawmakers are currently toying with the idea of limiting charitable deductions to instances when they exceed 2 percent of taxpayer income.

Berkowitz Pollack Brant’s tax advisors and accountants keep abreast of changing tax guidance and work closely with individuals, businesses and non-profit organizations to comply with regulations and maximize tax efficiencies.

About the Author: Adam Cohen, CPA, is an associate director in Berkowitz Pollack Brant’s Tax Services practice. For additional information, call (954) 712-7000 or e-mail info@bpbcpa.com.