Taxes and Holiday Gift Giving

Better to give (gift) and receive (a tax break)

 There are an increasing number of small business owners increasing their donations. And that is a good idea because we have all heard that it is better to give then to receive: You have you heard this, haven't you?
The tax law supports and emphasizes this point. However there are guidelines (limitations).
Below are the top 8 tips for deducting charitable contributions from the www.irs.gov website.
Charitable contributions made to qualified organizations may help lower your tax bill. The IRS has put together the following eight tips to help ensure your contributions pay off on your tax return.
   1. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations and candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.

     2. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.

     3. If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.

     4. Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.

     5. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.

     6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.

     7. To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.

     8. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.
As always documentation beats conversation any day. And below are some tips that come from Sandy Botkin’s Blog from taxbot.com
* Always donate either property or a check. No longer will cash deposited in a salvation army pot or in the church box be deductible.
* if the donation of any type is at least $250, you will need to get an acknowledgement by the charity of the donation. This can be one with a letter or with a receipt.
* If the donation is for $5,000 or more of property, you will need to get and attach to your tax return a copy of a qualified appraisal.
Doing this correctly and using taxbot (or other deduction tracking system) to keep track of these donations can make your gifts much sweeter by garnering you a nice, whopping tax deductions.
Big tip: Consider making gifts using your credit card such as to a church or synagogue or mosque. You would get the deduction this year even though you make the payment on the card next year.