Tax Tips for Substantiating Your Tax Deductions for Charitable Contributions
Keep Good Records
When you give to charity, you win twice, first by supporting good organizations, and second by claiming valuable tax deductions. We leave the choice of charitable entity to you, and instead focus on record-keeping practices that maximize your charitable contribution deductions.
To deduct cash, check or other charitable gifts, keep bank records or written communication from the charity showing
the name of the charitable organization,
the date of the contribution, and
the amount of the contribution.
For a detailed guide on record-keeping based on amount and type of charitable contribution, see the table at the end of this article.
Personal v. Business Deductions
Personal charitable deductions alleviate your tax burden and add to your bottom-line. However, business deductions are more valuable than personal charitable deductions.
Thus, whenever you have a choice between a business and a personal deduction, go for the business deduction.
For example, with a business deduction on Schedule C of your Form 1040, you save both
self-employment taxes, and
phaseout taxes caused by a multitude of AGI limits.
If you operate as a corporation, you gain with charity payments as business expenses because you are using pre-tax money for the charity rather than after tax deductions.
Here’s one corporate owner example. Say you are going to give $10,000 to a charity. If you earn the money on a W-2 in your capacity as an owner-employee, you pay payroll taxes on the earnings before you can give the $10,000 to the charity. On the other hand, if your corporation can claim the $10,000 payment to this charity as a business expense, you avoid the payroll taxes and either you (if you are an S corporation) or the corporation (C corporation) gets the deduction.
Find More Business Deductions
Check out the topic list for primarily business charitable deductions. Click here.
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Charitable Contribution Record-Keeping | ||
Type Contribution | Dollar Amount | Substantiation |
Cash | Less than $250 | Bank record or written communication from charity |
Cash | $250 or more | Contemporaneous written acknowledgement including: · charity name · date of contribution · amount contributed · description of any goods or services from charity in exchange for contribution |
Property | Less than $250 | Receipt from charity or reliable records |
Property | $250 to not more than $500 | Contemporaneous written acknowledgement including: · charity name · date of contribution · amount contributed · description of any goods or services from charity in exchange for contribution |
Property | More than $500, but not more than $5,000 | Same as above, plus: · description of the property · how and when you got the property · cost and basis · Form 8283 attached to your tax return |
Property (excluding stock, certain works of art and automobiles) | More than $5,000 | Qualified appraisal and Form 8283 |
Vehicle, boat and airplane | More than $500 | Contemporaneous written acknowledgement from charity that meets IRC §170(f)(12) |
Publicly traded stock | Any Amount | Form 8283 |
Privately traded stock | Greater than $5,000 and not greater than $10,000 | Form 8283, Part I describing property by donor and Part IV, donee acknowledgement, signed and dated by donee |
Privately traded stock | Greater than $10,000 | Qualified Appraisal |
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