If you are considering making a donation, you may be wondering how to best document your donation for tax purposes. This article covers Tax deductions for gifts of tangible property, Documentation needed for non-cash donations, and Expenses related to volunteering for a qualified organization. Read on to learn how to make the most tax-deductible donation possible. Here are a few tips:
Documentation required for non-cash donations
Unlike cash donations, there are several different types of documentation that need to be documented. The IRS cracks down on non-cash contributions that do not have proper documentation. Most nonprofits provide blank slips for donors to sign upon drop-off or pick-up, but these are not always adequate for tax deductions. In these cases, you should seek additional documentation that satisfies IRS requirements. This document should also state the date of the donation.
For cash donations, the recipient must provide documentation that the amount donated was properly documented. This documentation can come in the form of a receipt, a business bank statement, or a cancelled check. For donations by email, the donor can simply send an acknowledgement letter. The letter should include information about the goods or services donated and the recipient organization. If a donor makes a non-cash donation by text message, the donor can verify the transaction by referring to a phone bill with details of the donation.
Tax deductions for gifts of tangible property
Giving tangible personal property to charity is an excellent way to reduce your taxable income. Tax deductions for gifts of tangible personal property are based on the fair market value, or FMV, of the item. However, in order to take advantage of the deduction, the charity must use the gift in connection with the tax-exempt purpose of the property. The concept of "related use" can have extensive consequences. MultiCare Foundation staff will work with you to determine the best way to donate your tangible property.
For example, if you give the gift of stock, you can deduct the cost basis of the stock. If you give stock, you can deduct only the cost basis of the stock, not the fair market value. However, if you give a gift of personal property to a hospital, the tax deduction is limited to the cost basis of the stock. Gifts of tangible property may also be used to improve the physical environment of the hospital, enhance the musical program, or build a library.
Researching a charity before making a donation
When you give to a nonprofit organization, you should take the time to research a charity before making a donation. You should look for organizations with a track record of making a difference in the community, and you should choose ones that do the same. A 501c3 organization called Charity Navigator provides this service free of charge. The site evaluates the programs, mission, and values of more than 160,000 American-based charities.
Before making a donation to a charity, you should consider how much of the charity's budget it spends on administration. If the CEO earns a large salary, it may be because the organization is based in an area with a high demand for people with the right experience. You should also check the organization's website to see if it meets your standards. Read the comments from other people to get a feel for the organization's goals, effectiveness, and accountability.
Expenses related to volunteering for a qualified organization
You can deduct your expenses related to volunteering for a qualified organization, including food, clothing, and travel. However, some expenses cannot be deducted. For example, child care expenses are not tax deductible, but you can deduct the cost of a volunteer uniform. Moreover, you can also deduct the cost of a volunteer's meal and lodging. To take advantage of the deduction, you must keep the documentation of your volunteer activities.
Generally, you can deduct expenses related to your volunteer work, except for the time spent. Although time spent volunteering is not tax deductible, the organization will place you, and you may be able to deduct related expenses. Expenses related to volunteering for a qualified organization can include the cost of your uniform, car, and travel. Similarly, you can deduct expenses associated with your volunteer work, such as car or travel expenses, if you have a car.