How the IRS Verifies Charitable Donations
Making a donation is one of the best ways to show your love for your community.
It’s also great for making you feel like you’ve given back to the world, and reducing the tax burden on your life.
And to get all of the tax benefits, you want to make sure that your donation is counted before filing taxes. The IRS has strict guidelines for what makes a valid charitable donation. If you don’t meet all of these requirements then you may not get the deduction on your taxes that you were expecting.
Here are ways to ensure that your tax deduction gets approved.
Note: This is a general article about deductions, you may just be looking for information on the tax benefits of cryptocurrency donations.
IRS guidelines for charitable donations
If you want to be able to deduct your charitable donations on your taxes, there are some guidelines that you have to meet.
- You can’t deduct cash or property donations if the charity sells the items within two years of receiving them.
- A donation doesn’t count as a charitable deduction if it is made with goods or services that are worth more than what you donated.
- If you donate blood, then it must be at a qualified blood bank and not just for medical treatment or research.
- You can only claim up to 50% of the cost of donating household items, clothing, furniture, appliances, TV, etc., which are worth up to $5,000 each year without receipts.
- If someone else pays for your ticket to go somewhere but it is related to a charity event or function then you can take a deduction for their contribution even though they technically paid for it themselves because they had no interest in using the event itself as an entertainment expense.
And guess what, cryptocurrency donations are tax benefits to donors.
Qualifying as a charitable donation
In order to qualify as a charitable donation, the taxpayer must have given something to a qualified charity. That means that if you donate clothes or old furniture, it’s not going to count because those items aren’t counted as “something” in regards to qualifying for a tax deduction. You also can’t deduct your time. You need to give something of value to the charity in order for your donation to qualify. There are many other factors that determine whether a donation qualifies, but these are some of the most important ones to remember.
What is not a charitable donation?
One way to ensure that your charitable donation is counted is to know what it is not. Donations cannot be made in exchange for any goods or services. If you’ve ever donated to charity and after the transaction you were given something back, then this donation would not count as a charitable contribution. It also doesn’t matter if the good or service is worth more than the amount you paid for it. For example, if someone donates $2,000 to charity but receives a dinner worth $50 for their contribution, they can’t claim that as a deduction on their taxes. The IRS says that this counts as an exchange of goods or services and not a true charitable donation. You are still required to make the donation but it will not be deductible on your taxes.
Also, donations made only with the intent of getting tax deductions are not considered charitable contributions either.
That means if you donate money to charity just so you can get a higher deduction on your taxes then that’s not going to fly with the IRS.
All donations have to be made willingly without any obligation involved on behalf of the donor. So, if you’re giving because you want others to give too then that’s okay! But if you’re giving just because you want some sort of reward which doesn’t have anything to do with being charitable then your donation isn’t going to count as a charitable contribution either.
Tax deductions you can expect from your donation
– You should always get a receipt from the organization as proof of your donation.
– The deduction is not limited to money or cash donations. You can also deduct clothing, household items, and other goods.
– Your deduction is still valid if you donate to an organization that can’t issue a receipt, such as those who serve food and shelter.
– Keep good records of what you’ve donated and when.
– If you donate something that has increased in value since you purchased it, then you may be able to claim the difference on your taxes as well.
– If you donate shares of stock, then there are some things to keep in mind:
- You must own the shares for more than one year before donating them
- You must donate them at their current market value
- You can only deduct up to 30 percent of your adjusted gross income (AGI) per year
- If the corporation goes bankrupt and liquidates after your donation, then you will not be able to claim a deduction for that company
Ways to ensure your tax deduction gets approved
1) Provide a receipt with the organization’s name and your name on it, the address of the organization, date of contribution, and amount of contribution.
2) Proof of donation in the form of a bank statement showing a wire transfer to the charity.
3) If you donated clothes, household items or furniture, you must also provide a letter from an organization or from someone authorized by the IRS stating that all or some specified items were sold at a charity auction.
4) If you donated cash and haven’t yet received your receipt then either:
- You can get a receipt for your charitable cash contribution by using an envelope with just your name and address on it and writing “donation” across the front;
- Keep records of your contributions in a notebook;
- Donate online to receive an instant confirmation number
- If you donated tangible personal property such as jewelry or furniture with fair market value over $5,000 ($500 if given to an individual), you need to obtain a qualified appraisal.
Make sure your charitable contributions are tax deductible
To make sure your charitable contributions are tax deductible, you should follow these guidelines.
First, make sure your contribution is made to a qualified charitable organization.
Second, your donation must be a real and honest gift with no strings attached.
Third, it must not be a disguised investment or business expense.
And lastly, it must not be made just to get a tax deduction. If you have any questions about your donation being tax deductible, talk to your accountant!
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