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Donations to charities fall under two categories: financial contributions and donations in kind. The first is amounts in cash, check or paycheck deductions, out-of-pocket expenses and transportation expenses such as gasoline for your car if you used it in contributing to charity or doing volunteer charity work.
Be advised you must have a receipt or bank record for all the charitable contributions you made for them to qualify for deduction.
The second category includes property, clothing, household items, furniture and other non-cash goods.
Donated property is generally deductible at its full fair market value minus the probable capital gain or income derived if it had been sold. The purchase prices of new items are fully deductible; but for used ones, only their fair market value can be charged. Fair market value is the selling price of such goods at thrift stores. Used goods must be functioning and usable to be eligible for deduction. Property or properties worth more than $5,000 may require qualified appraisal.
If a car, airplane or boat valued more than $500 is donated, only the smaller amount of either its fair market value or gross sales if sold may be deducted. But the fair market value is generally opted for if the organization uses the vehicle, improves it significantly, or grants the vehicle to an individual working for the organization.
On the other hand, the value of time spent on charitable works or services rendered are not deductible, though the out-of-pocket expenses incurred are.
Deductions are normally only up to 50% of the adjusted gross income (AGI). For appreciated property, up to 30% may be deducted if the fair market value option is selected, and 50% if the property basis option is chosen. The amount of contribution exceeding the limits may be passed on up to 5 years after.
Robert L. Daniel and partners of Limon Whitaker & Morgan, for years have helped businesses and individuals Nationwide, with their delinquent IRS & State tax problems. The firm is based in Los Angeles, California USA. [http://www.limonwhitaker.com] / Tel:888.321.6188
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