It is very important to know how to write off donations. Donations can be good for society and good for the donor, as he can write off the donation when tax time rolls around. If the donor itemizes deductions - contributions to church, clothing donations, and even donations of stock can be written off. The IRS has made several rules concerning how to write off donations and it is important to follow them.
- Choose the correct organization. In order to write off a donation, it has to go to an organization approved by the IRS. Sorry, the $100 given to uncle Bob to fix his car is not deductible. In order to be sure whether an organization has been approved, please visit the IRS website and search for charities.
- Keep accurate records. To write off cash contributions, make sure records are kept detailing areas such as a canceled check, bank record, or a receipt with the charity's name, date of the donation, and the total amount. Donating goods such as clothes and household items are written off using the fair market value. It's not the amount that was paid for the items, but the amount the items were worth when donated. If an item is valued over $500, additional forms have to be attached to the tax return. When donating vehicles valued at more than $500, the deduction is limited to the amount the car brings at auction when sold by the charity, in most cases.
- Fill out the appropriate tax form. Use the appropriate information to fill out the schedule A form The total amount of charity tax credit is listed on line 40.
Please be aware that taxpayers are only eligible to benefit from donations tax wise if they itemize deductions and those deductions are higher than the standard deduction. This is something that is not always listed on the commercials shown on television asking for car donations. Itemized deductions are listed on schedule A..