Steve Sims EA llc


Announcements and Updates

“Did you give until it hurts?” You may be entitled to a Charitable Contributions Tax Deduction...

Charitable contributions are deductible only if your client itemizes deductions on their federal Schedule A (Form 1040) Itemized Deductions, and has the proper documentation to support the deduction. Deductions for most charitable contributions are generally limited to 50 percent of your client’s federal adjusted gross income (AGI), but in some cases limitations of 30 percent and 20 percent of federal AGI may apply. Also, the general rule is that payments to individuals are not deductible.

A couple of items to keep in mind:

Deduction Limitation

If your client received a benefit as a result of making a contribution to a qualified organization, the deduction is limited to the amount of the contribution exceeding the value of the benefit received. This frequently arises when a contribution entitles the donor to merchandise, goods, or services, including admission to a charity ball, banquet, theatrical performance, or sporting event.

Example: If your client buys a ticket to a charity dinner for $100, and the dinner itself is valued at $35, the donation will be limited to $65 – the amount that exceeds the fair market value of the benefit received.

Remember to Have Proper Documentation

Your clients must keep adequate records to prove the amount claimed. Contributions of $250 or more to any single charity require written acknowledgment of the contribution by the charity (beneficiary) before claiming a charitable contribution. Written acknowledgement from the charity is required and must be obtained from the charity on or before the earlier of: the date when the tax return is filed, or the due date of the tax return (including extensions). The written acknowledgement must contain:

    1    Charity name.

    2    Amount of cash contribution.

    3    Description (but not the value) of any noncash contribution(s).

    4    Statement that the charity did not provide goods or services in return for the contribution, if that were the case.

    5    Description and good faith estimate of the value of the goods or services, if any, that the charity provided in return for the contribution.

    6    Statement that goods or services, if any, that the charity provided in return for the contribution consisted entirely of intangible religious benefits.

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