Giving does good and feels good, if you can swing it—and every year many Americans make the decision to donate money or property to organizations and causes of their choosing. In fact, according to data from Giving USA, Americans gave $373.25 billion in 2015 alone—and that’s a 4% increase in philanthropic giving over 2014.
Whether you're a philanthropist or an occasional donor, you’ve likely made a gift because you want to make a difference. But not only has your gift donation helped someone else, it also allows you to take advantage of tax breaks that benefit your bottom line.
Let's take a look at how large donations—those cash contributions over $250, and noncash donations over $500—are organized.
The IRS places large gift donations into three categories:
- Cash contributions more than $250,
- Noncash contributions more than $500 but not over $5,000, and
- Noncash contributions over $5,000.
If the sum value of all noncash contributions for the year reaches over $500, you will need to prepare Form 8283.
Written acknowledgement and record of your deductible gifts to an organization needs to be kept with your tax returns.
For Monetary Donations of $250 Or More
If you want to claim a deduction for a lump sum contribution of $250 or more, you must have an acknowledgment of the contribution from the qualified organization or certain payroll deduction records. The acknowledgement of your gift donation must meet these criteria:
- It must be written.
- It must include all of the following:
- The amount of cash contributed,
- Whether the qualified organization gave any goods or services (other than token items or memberships) as a result
- A description and good faith estimate of the value of any goods and services described in (b), and
- A statement that the only benefit you received was an intangible religious benefit, if that was the case.
- It must be received on or before:
- The date the tax return is filed for the year in which the contribution is made, or
- The due date, including extensions, for filing the return.
For Noncash Donations Over $500 (But Not Over $5000)
If you claim a deduction of more than $500 for a noncash contribution, you must report information about the gift donation on a Form 8283.
You'll also need a written acknowledgement, and your written records must also include:
- How you acquired the donated property – purchase, gift, or inheritance.
- The approximate date you acquired donated property – or approximate date the property was completed if it was created, produced, or manufactured.
- The cost, or other basis, and any adjustments to the basis, of property held fewer than 12 months. If available, include this information for property held 12 months or more. This requirement doesn’t apply to publicly traded securities.
For Noncash Donations Over $5000
If your noncash single charitable donation for one item or a group of similar items is more than $5,000,
- The organization must give you a written acknowledgement,
- You must keep the records required under the rules for noncash donations of more than $500 but less than $5,000, and
- Generally, you must obtain a qualified written appraisal of the donated property from a qualified appraiser.
There's a specific way to calculate whether a noncash deduction is over $5,000. You need to combine all deductions for similar items you donated to all organizations during the year. This usually means you will have to get a qualified appraisal of all donated property. You must also complete and file Form 8283.
Get Started By Itemizing With More Zero
To claim a deductible gift on your tax returns you'll need to itemize your deductions using IRS Form 1040 with Schedule A.
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