Many people will make a mad dash to squeeze in a few more donations to charities at the end of the year, ensuring a tax deduction for 2014. To qualify, the details of the gifts and the receipts are important. First, tax savings can only occur when the total of all itemized deductions are greater than the standard deduction.* Then, make sure you know about these 5 guidelines:
- Phase out of on itemized deductions (which effectively increase the marginal tax rate) begin with adjusted gross income (AGI) of $254,200 for singles and $305,050 for married couples who file jointly. The phase outs reduce deductions by the lesser of 3% of excess AGI or a maximum of 80% of the amount of otherwise allowable deductions.
- Your canceled check or credit card statement serves as a record of the donation as long as they include the name of the charity, transaction date, and amount of donation. For donations of $250 or more (money or goods), a written acknowledgement from the charity is required.
- If you donate household items or clothing, they must generally be in good condition to qualify for a tax deduction. Many charities will give you a blank receipt. For donations valued at over $250 at the time of the donation, you (or the charity) must create a detailed description of items donated.
- For a requested noncash donation deduction of over $5000, a qualified appraisal is also required.
- Confirm that the donations for which you claim deductions go to qualified charities and/or churches, synagogues and other qualified religious organizations. You can ask the organization if deductions are tax deductible, or look them up on the IRS Select Check. You may still want to donate whether or not the organization qualifies, but you won’t be able to count the gift as a deduction.
Talk with Rachel Alexander, CPA, Tax Manager at Salmon Sims Thomas, if you have questions about the specifics of donations.
*For 2014, the standard deductions are: Single – $6,200, Head of Household – $9,100, Married Filing Jointly – $12,400, Married Filing Separately – $6,200