As tough as the economy is, Americans in significant numbers continue to support local and national charities and to deduct the contributions on their tax returns. Unfortunately, the IRS sometimes disallows the deductions.
The IRS wants taxpayers to be aware of several things before they deduct charitable donations, and has come out with nine helpful tips. Some are pretty obvious: For instance, you have to give the IRS an itemized list of your deductions.
Others deal with more complicated issues. For example, how much can you deduct for the three-year-old pickup you gave to the local food kitchen that delivers to homebound people? Or, how much can I deduct for a pledge I made at midyear that I don’t have to fully pay out until next year?
Then there are the organizations themselves. The IRS points out that not every “charity” is eligible for a deduction, and that this year 275,000 U.S. groups automatically lost their eligibility.
1) Trust, but Verify: You love the charity and its work. But hold on. Before you write a check to the organization, make sure it qualifies for a deduction. Just ask, or if you prefer to be discreet, look up the group in IRS Publication 78, Cumulative List of Organizations.
2) You Must Itemize: You may say “duh,” but not everyone realizes you have to itemize deductions in order for your charitable contributions to be deductible. You do this by using Form 1040, Schedule A.