Become familiar with the types of charitable tax deductions.
As you begin the process of preparing your tax return, fully understanding the deductions available to you is a crucial consideration. If you are like many taxpayers, charitable contributions likely are included on the list of items you desire to deduct as part of your tax return. Therefore, you need to become generally familiar with the ins and outs of a tax deduction for gifts to charity.
Function
The function of the tax deduction for gifts to charity is two-fold. First, the deduction exists to encourage a person to donate gifts, including cash and items of property, to charitable organizations. Second, the tax deduction for gifts to charity is in place to provide a taxpayer some tax relief for her generosity to a non-profit entity.
Considerations
In most situations, a taxpayer is able to deduct up to 50 percent of her adjusted gross income for charitable contributions. If the gift is an item of property rather than cash, a reasonable effort must be made to determine the fair market price of the donation.
Misconceptions
The most common misconception associated with the tax deduction associated with a charitable contribution is that a taxpayer can deduct any amount for a charitable contribution. Indeed, some taxpayers actually attempt to take over a 50 percent deduction of their adjusted gross income only to find the Internal Revenue Service requiring these individuals to amend and refile their returns.
Documentation
To take a tax deduction for a charitable contribution, a taxpayer must clearly and completely document the value of the property donated. With a monetary donation, determining the total value of the donation is not difficult. The problem becomes more complex when the donation is an item of personal property. A taxpayer needs to obtain a receipt from the not-for-profit organization that received the donation.
Expert Assistance
A taxpayer with a question or an issue surrounding a charitable contribution should consider seriously retaining the services of a tax specialist. There are attorneys and accountants who specialize in tax matters who assist taxpayers in resolving issues arising out of a charitable contribution during a particular tax year.
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