Finance & Enjoyment Blog

Give A Little: Charitable Financial Planning in Denver

Give A Little: Charitable Financial Planning in Denver

Thanks to income tax laws, it pays to give. If your family has a favorite charity or cause that you regularly donate to, do not forget to reap the tax deductions you deserve. However, the rules on filing and receiving these deductions are tricky and apt to change, so educate yourself on their nuances, and keep an eye on your accounting firm (and Capitol Hill) for updates to the tax codes. But here are the rules as they stand, which every charitable household should know before writing a check.

First, in order to be eligible for any tax deduction, you must complete the donation by December 31st and itemize it by filing Form 1040. The steps after that depend on the amount and form of your donation. For contributions less than $250, all the IRS needs is a bank record or a receipt from the organization. For contributions more than $250, the IRS requires a written confirmation from the organization. Do not forget to save your receipts, bank statements, and correspondences with your charities!

For non-cash donations, the rules get trickier. Non-cash items must be in good condition to be deductible, and at a certain value, their worth must be professionally appraised. For gifts valued at over $500, donors must file Form 8283 with their Form 1040, outlining the nature and worth of the donation. Non-cash donations over $5000 require a written appraisal of their value signed by both the appraiser and a representative of the recipient charity. These donors must also fill out Section B of Form 8283. For vehicle donations, depending on whether the charity uses or sells the vehicle, the charity will respectively fill out Form 1098-C and give it to both the donor and the IRS. The tax deductible you apply for must conform to this form or else the IRS will think you are attempting fraud.

Also, for big donors, the IRS limits donations to 50% of your adjusted gross income. For certain types of charitable organizations, or non-cash contributions, the limitation may be 20% or 30%. Read up on these adjusted gross income limitation rules in IRS Publication 526.

Charities and nonprofits took a big hit during the recession, but now as we climb out of its financial crisis, its charities need all the help they can get. Don’t let all these IRS forms intimidate you; choose your cause, contribute, and let your family enjoy the tax deductions.

Not sure how much you can donate to charity? KKB's financial planning services can help you and help you reap the tax benefits as well.


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