WASHINGTON — Did you donate a car to a charitable organization in 2015, or some clothing to the church thrift shop? Maybe you made a cash contribution to your alma mater or in memory of a loved one.
If you want to take a deduction for the donation, you have to itemize on your tax return. But there's more to it than that.
First, you have to make sure the organization to which you're donating is a qualified charity. And the money can't be targeted to a particular individual, even if it's going through that charity, said Dave Du Val, vice-president for consumer advocacy at taxaudit.com.
He uses this example: Say you're driving to Goodwill to drop off some clothes and you see a homeless man in the street. You give him one of the coats that you were planning to donate. "It suits (you) well in the next life, but it's not a deduction," he said.
Similarly, if your neighbours' house burns down and your church starts a fund to help them rebuild, a contribution to the fund isn't deductible, Du Val said. However, if the church has a fund to help people in need, but not specifically your neighbour, you could take the deduction.
For a cash contribution, you need proof that you made the donation. That could be a cancelled check or an itemized line on your credit card statement. So, Du Val said, if you put a $10 bill in the bucket of a Salvation Army bell ringer, that's not deductible. But if you wrote out a check to the Salvation Army and put that in the bucket, it is.
If the contribution is more than $250, you also will need a receipt from the organization.
The Internal Revenue Service makes clear, "If you get something in return for your donation, your donation is limited. You can only deduct the amount of your gift that is more than the value of what you got in return."
The IRS lists possible items received for donations, including meals, merchandise or tickets. Charitable organizations often will include on your receipt the amount that is deductible.
Congress, as part of the tax extender bill passed late last year, made permanent the ability of people 70 1/2 years old or older to roll over up to $100,000 from their IRA to a charity tax-free. Those who take advantage of that provision won't have to count the distribution from the IRA as income. But there's no double-dipping. If you make the direct donation, you can't also deduct it on your return.
Du Val said taxpayers who want to donate are "generally better off" if they don't have to deal with the extra income and the resulting taxes. He said the distribution also counts toward the required minimum distribution that IRA holders have to start taking at that age.
What about deductions for contributions of clothing and other property?
You can only deduct the fair market value of an item — what it would sell for at a thrift store, for example. "Even if the shirt is new and still has the tag on it, people aren't going to go into the thrift store and pay $100 for it," Du Val said.
And there's no deduction for sentimental value.
If the non-cash donation is more than $500, you must fill out Section A of Form 8283 and file it with your return. If it's more than $5,000, Section B also is required. You'll also need a valid appraisal of the item in hand when you file your taxes, Du Val said.
If you donate a car, the deduction is not the fair value of the car but what the charitable organization sells it for, according to Du Val. However, there is an exception: If the organization gives the car to a needy family, for example, or uses it for an ambulance, you can take the fair market value, he said. In either case, you have to substantiate the vehicle's value.
Don't forget that if you're delivering the donation or doing other work for a charitable organization, you can deduct the mileage. The rate for 2015 was 14 cents a mile for using your car for charitable work.
As the presidential campaign moves toward the first primaries and caucuses, taxpayers should be aware that donations to political candidates are not deductible. Neither the candidates nor the political parties themselves are charitable organizations.
Carole Feldman, The Associated Press