- Tax Deduction Information
Citizens Utility Board is not responsible for the accuracy of the following information. Please check with your own tax advisor.
What You Can Deduct
As long as you itemize on your tax return, you may deduct gifts to religious or charitable organizations, such as churches and synagogues and groups like the Boy Scouts, Red Cross, and YM/YWCA. You also may deduct contributions made to scientific, literary, and educational organizations, as well as to organizations devoted to the prevention of cruelty to children or animals or those that foster amateur sports competitions.
Deductible gifts to nonprofit can take many forms. You can deduct cash contributions up to 50 percent of your adjusted gross income (AGI), and any excess contributions can be carried forward for up to five years. You also can make donations of property -- from used clothing, to furniture, to computer equipment -- and earn tax deductions. When you donate property, your deduction is generally equal to the fair market value of the property at the time you give it, not its original cost.
To make the most of your charitable contributions, consider donating appreciated capital gains property that you've owned for more than a year, such as shares of stock or a mutual fund. When you donate long-term property that has appreciated in value, you generally earn a deduction for the property's fair market value and never have to pay capital gains tax on its appreciation. Contributions of appreciated capital gains property are generally limited to 30 percent of your adjusted gross income.
What You Cannot Deduct
Generally, gifts to individuals are not deductible. You also cannot claim a deduction for political contributions, gifts to labor unions, donations to homeowner's associations, or gifts used for tuition.
Payments made partly as a contribution and partly in consideration for goods or services furnished to the donor by the nonprofit -- referred to as quid pro quo contributions -- are not fully deductible. For example, if you buy a $100 ticket to a nonprofit concert performance and the equivalent ticket normally costs $40, you may deduct only $60. If you choose not to attend the event and return the ticket to the nonprofit to be resold, however, you may deduct the full $100.
When To Make Your Deductible Contributions
To qualify for a deduction in a given tax year, you must make your gift by December 31. That includes checks or properly endorsed stock certificates mailed by New Year's Eve or a gift charged to a bank credit card by that day.
Documenting Your Contribution
Canceled checks are sufficient documentation for cash donations under $250, but you'll need more proof of your generosity if you donate $250 or more. The rules require that you have a receipt, letter or other statement from the charitable organization listing the amount of the cash donation, or, for contributed property, a description of the property donated. In addition, the receipt must state whether or not the nonprofit provided any goods or services in exchange for the cash or property. Where a charitable organization provides goods or services in exchange for contributions over $75, the organization must provide the donor with a good faith estimate of the value of the goods or services provided. For non-cash contributions over $500, you must complete Form 8283 and attach it to your tax return. If the non-cash contribution exceeds $5,000 ($10,000 for gifts of closely held stock), you also may have to obtain and attach a written appraisal. A summary of the appraisal should be attached to the tax return to substantiate the deduction.
(Additional requirements apply to contributions of art if you are claiming a deduction of $20,000 or more.) There is no appraisal requirement for publicly traded securities for which a market quote is readily available on an established stock exchange.
CPAs recommend that you make sure that you have adequate receipts and other documentation for your charitable gifts. Doing so will make the preparation of your tax return a little easier next year and give you peace of mind in knowing that should you be audited, your records are in order.