What is a charitable donation?

Tips for getting organized for the end-of-the-year charitable giving.

What is a charitable donation?

When thinking of donating to a charity, it is necessary to determine if the charity is a qualified charity according to the Internal Revenue Service (IRS). To be a qualified charity according to the IRS, the charity must have a 501(c) (3) tax-exempt status. The title-qualified charity means that the organization is run primarily for charitable, religious, educational, literary or scientific purposes. Another classification of a qualified charity is if the charity is working for the prevention of cruelty to animals or children or for the development of amateur sports.

Nonprofit veterans’ organizations, fraternal lodge organizations, cemetery and burial companies, as well as certain legal corporations can qualify as charitable organizations. Even federal, state and local governments can be considered charitable organizations provided the money donated is earmarked for charitable causes.

If you are not sure the organization is a qualified charitable one, you can use the Exempt Organization Select Check program with the IRS to determine if it is. Donations to specific individuals, political organizations or political candidates are not tax deductible.

In order to take a tax deduction for a contribution you have to file the 1040 tax form and the itemized deduction form.

If you are considering donating property or stocks and bonds, the value of the donation must be the fair market value. Fair market value is defined as the price paid by a willing buyer to a willing seller for the property. Vehicles have special considerations before be classified a donation.

To be organized for tax season, you need to have a bank record, payroll deduction record, or a communication from the organization with the organization’s name, the date, and the amount donated. Just a receipt is not good enough.

If the donation is made by a text message, the phone record must have the name of the organization, the date and the amount donated.

For organizing your records for donations for more than $250, you must have a bank record, payroll deduction or a written communication from a qualified organization indicating the amount of cash, description of any property donated, and whether the organization provided goods or services in exchange for the donation.

If the total noncash donations exceed $500 for the year, you must complete and file IRS form 8283, Noncash Charitable Contributions with the income tax form.

Michigan State University Extension says that it is not too late to get organized for tax season and make charitable donations to qualified charitable organizations. Be sure to get a receipt with the name of the charity, date of the donation, and the amount donated. Keep the receipt in an organized file for tax season. Watch the donations help decrease your tax liability.

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