Those individuals who are eligible to itemized deductions should consider making charitable contributions by year end to offset the tax bite. The Internal Revenue Service provides guidelines on what qualifies as a donation.
Deductible contributions must be made to a qualified organization. This includes nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals. Most organizations will offer qualifying information to donors. Alternatively, besides asking your accountant to verify, the IRS provides information online at www.irs.gov/app/pub-78.
- The charity donation is only deductible up to the cost of the donation over any benefits received. For example, a contribution to a dinner banquet may only be deductible for the amount over the fair market value of the dinner received. Most organizations will provide this information.
- Written acknowledgments are required for cash donations of $250 or more to any organization. The acknowledgment must include the amount of the donation, whether goods or services were provided, and a statement from the organization of the benefit of the donation.
- Also, the following items are not deductible: Payments to individuals, payments to nonqualified organizations, and value of time or service.
- All donations must be made by December 31, 2011 in order to take the benefit of the deduction on a 2011 personal tax return. Payments made by credit card, must be charged by the end of the year, payment can be made subsequent to the end of the year.
If you have any questions regarding the eligibility of your charitable contributions, please feel free to contact your Marcum Tax Advisor.