The winter holiday season is a time for celebrating and reuniting with friends, family and loved ones, but it's also one of the periods when Americans spend the most money. Although holiday gifts, food and accessories are the most common items Americans spend money on, charitable giving to groups and organizations also spikes. But during all the commotion, some individuals may forget to keep track of their contributions, making it more difficult to claim deductions during filing season.
There are a number of ways to track and organize donations and contributions, making it easier for givers to receive small tax breaks this April. The key is to have a basic knowledge of the tax rules regarding which contributions can be deducted and keeping tidy records.
First, individuals who plan to deduct contributions should make sure their donation or gift is given to a qualified organization - otherwise, they may not be able to deduct it on their taxes. There are a number of groups and institutions that fall under the qualified organization definition, such as churches, most nonprofit groups, colleges and museums. Most organizations can be considered qualified if they operate for religious, educational, charitable, scientific or literary purposes. In addition, groups that work for the prevention of cruelty to animals or children generally qualify. Keep in mind that contributions to specific individuals, political organizations and candidates are not deductible.
Second, individuals should ask for a receipt outlining the details of the contribution and keep bank or payroll statements that also verify cash, check or monetary donations. Taxpayers must also have written communication from the organization that provides the name of the group, date of the donation and amount of the contribution.
Different contribution amounts and the type of contributions themselves may impose their own rules and require different actions in order to claim them, making it important to consult a tax preparer
. For example, cash or property contributions amounting to more than $250 require communication from the organization giving a description of the donation and any goods or services provided in exchange for the gift. Individuals who make noncash contributions exceeding $500 must fill out and attach Form 8283. Section B of this form must also be filled out by taxpayers who contribute items exceeding $5,000, which typically require an appraisal.
Taxpayers who plan on claiming charitable contributions must file Form 1040 and itemize their deductions on Schedule A.
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