Introduction
An individual may claim tax deductions for contributions to non-profit organizations recognized under sections 501(c)(3) of the IRS tax code. This deduction however is subject to several rules and regulations
How do I know donations to which organization will be tax deductable?
Generally speaking, religious organizations, public charities, social service and public benefit groups and veteran’s organizations maintain 501(c)(3) status. This status is confirmed by the IRS and the organization is obligated to file a Form 990 to maintain its tax exempt status. Ensure that the organization has been confirmed as a tax exempt non-profit before donating. Donations to the government for public purpose, such as contributing to the police department are also eligible for a deduction. Nonspecific contributions to the Social Security fund are also deducible. Finally you may take deductions made to Canadian and Mexican charities if you have income in those countries. Contributions may also be deducted from contributions to Israeli charities limited to 25% of adjusted gross income from Israel.
What are steps I must follow to deduct a charitable donation?
First, ensure that your donation does not use your donation to benefit a private individual or lobby for political causes. 501c3 organizations are banned from such activity so any money that goes to those causes will b ineligible for a deduction.
Determine your benefit from the charitable contribution if your contribution constitutes payment for goods or services.
– For instance, if you have bought a ticket to a charity dinner, you must subtract the market value of the dinner and you may only claim the difference between the ticket price and the actual value.
— Example: If you were to buy a $300 ticket for a dinner to support People for the Ethical Treatment of Raccoons (PETR) and the actual dinner was worth $40, you may deduct $260 as you enjoyed a benefit of $40 from your contribution.
If the organization states that the benefit is not substantial than you may make a deduction in full.
For payments over $75 dollars, you must receive a written statement for the organization that assesses in good faith the cost of the services.
You may also claim unreimbursed expenses incurred accompanying youth to attend special events on behalf of a qualified charitable organization. This does not include personal expenses incurred while accompanying the youth such as meals and travel. You also cannot deduct the cost or value of your time.
You must keep records showing the time, place, date, amount and nature of the expenses.
Items tangible and otherwise donated to charity must be appraised at fair market value and have no further benefit to the individual claiming the deduction. Fair market value is the price at which property would change hands under normal market conditions between seller and buyer.
Keep in mind that any deductions may not exceed 50% of an individual’s adjusted gross income.
Source: IRS Publication 526 – https://www.irs.gov/publications/p526/ar02.html#en_US_2010_publink1000229650
