Charitable Contribution Limits and Characteristics

Charitable donations are a fantastic way to reduce your tax bill through deductions as well as a way to give back to the community. Acknowledging the appropriate charitable contribution limits and their legalities is key in order for a taxpayer to maximize the number of deductions for his or her charitable contributions over the course of a year. However, there are a few guidelines that you can use to help establish personal charitable contribution limits in order to maximize your yearly tax return.

General Guidelines
Before delving into the specific types of donation and their individual traits, there are important rules to be aware of when making any type of charitable contribution. First, taxpayers who are married and filing jointly must have more than $12,600 in deductions to itemize deductions in 2015. For single or married filing separately, $6,300 is the total. Secondly, only the charitable contributions made to charities with tax-exempt status are qualified to receive a tax deduction. To verify an organization’s tax-exempt status visit: https://www.irs.gov/Charities-&-Non-Profits/Search-for-Charities.
Churches, however, are automatically tax-exempt. One of the most pertinent rules to remember is that there are charitable contribution limits. For most donations, the limit is 50% of adjusted gross income. Likewise, taxpayers volunteer to work for a qualified organization may associate unreimbursed travel expenses such as miles driven on their personal car with a deduction, but they cannot assign a value to the personal time or services given to a charitable organization.

Types of Contributions
Noncash Contributions
Noncash contributions most often include household goods or clothing that the taxpayer has donated. This type of deduction is incurred when the taxpayer provides an itemized and thorough list detailing the item donated, its condition, and its quantity. There are a few charitable contribution limits to this type of donation. If your donations cumulatively value more than $500, you must fill out Form 8283, which provides the IRS with more details about the products donated and the recipient organization. Finally, if a virtual currency such as BitCoin is used in donation, it falls under the noncash gift guidelines and should be processed as such.
Vehicle Donations
Donating a vehicle such as a boat or a car may seem like a difficult task. However, with the right information on charitable contribution limits, the vehicle’s owner can complete this donation and receive a fair and legal deduction as the result. The standard rule is that the donor of a vehicle may deduct the amount the item was sold by the receiving organization. If the vehicle has plans to be used by the receiving organization, or if the vehicle is donated to an underprivileged family, then the taxpayer is allowed to deduct the fair market value of the vehicle. It is important to note that the organization must give the donor a Form 1098-C if claimed value is more than $500 within 30 days of the charitable contribution. This form requires information such as the donor’s name and social security number, make, model, year, and VIN of the vehicle. Lastly, the receiving charity must denote the amount of goods or services given in exchange for the vehicle.
Ways to Acknowledge Charitable Contributions
A written gift acknowledgement is a way the charitable organization’s saying “thank you” to donors. IRS regulations require that require that before a donor claims a tax deduction for a charitable contribution, the donor must have a bank record or a written communication from the charitable nonprofit documenting the contribution. For example, the recipient who receives cash that is within the charitable contribution limits of $250 or more must acknowledge this donation via an annual statement, at the minimum. A statement of thanks should also include what the donor received in exchange, such as a book valued at a certain amount. When a donation includes time and services outside of the cash donation, the recipient should acknowledge this expenditure with a letter that explains the donor’s involvement, but does not assign a value to his/her involvement.
When noncash donations are made, an organization must thank the donor and acknowledge what was donated, but the organization should not assign a value to the donation. Other situations, such as a taxpayer giving a personal gift to an individual within an organization (for which the taxpayer will not receive a deduction) do not need to be reported.
Learn more about charitable contribution limits and characteristics with your accountant at 212 Tax. To contact your C.P.A, visit the client portal.