friendsoflakotayouth.com

Tax Receipts

Because we are a non-profit organization, any items donated are tax deductible.  There are, however, a few rules that we have to abide by.  If you would like a tax receipt, it would be appreciated if you would bring us a copy of your receipts when you drop off you packages.  We can then issue your tax letter on the spot and we will have a copy of the receipts for our records.    If you are donating used items, please bring a list with you so that we may have a copy for our records.  Following is excerpts from an informative article  found on MoneyBlueBook.com regarding tax receipts for used items.

 
The Charitable Tax Deduction Is Useful Only If You Itemize

The calculation of one’s annual tax return usually entails adding up all the income and gains for the year, and then deducting expenses and losses to come up with the final taxable income balance. The IRS provides two primary deduction methods – the simpler standard deduction, which is a flat set amount, and the itemized method, which requires the taxpayer to manually report each individual deduction that he or she qualifies for. The charitable deduction is one of many that falls in the itemized category. The taxpayer has to choose whether to take the standard deduction or to itemize. However, until the total sum of all itemized deductions exceed the standard, it doesn’t make sense to itemize. Unless you already carry a hefty home mortgage with itemizable mortgage interest, it probably makes more sense to itemize every other year, and bulk up your donations in those years. When you itemize, charitable contributions should be a key part of your tax reduction plan.

Four Steps To Donating Your Items And Getting That Tax Deduction, Without Being Audited

When donating items for the tax deduction, the worst thing you can do is to drastically overestimate the donated  value and trigger an alarm bell. Triggering a red flag will send the IRS man running to your home to request receipts and proof of your donation. Because charitable donation is one of those tax items frequently abused by taxpayers, the IRS closely scrutinizes such claims. Thus you want to make sure you go by the book:
 

1) Make A Detailed Record Of Your Donated Items – While it is likely no questions of your donation will ever arise, it is still important to keep a detailed list of your donation in case questions arise or you get audited on the matter. Try to keep a spreadsheet chart or list of all articles donated, recording information such as the number of  articles, the estimated dates of purchase, condition at the time of donation, the assessed fair market value of each item, and perhaps even substantiation of how you calculated and arrived at the particular valuation. Some people also recommend taking digital photographs of each item. I recommend taking photos, especially for those items whose valuation may be a bit high and out of the norm.

2) Assign An Appropriate Fair Market Value For Each  Item – The donation valuation process is generally subjective and you are responsible for assigning the proper value for your charitable donations. There is no exact IRS formula or chart as the agency relies on subjective approximations. However, if you wish to donate more than a total of $500 worth of goods to charities, you must complete Section A of Form 8283 Non Cash Charitable Contributions, and include it with your federal tax return. A formal donation appraisal by a qualified appraiser is not needed unless you are making a contribution of non-cash property worth more than $5,000. A qualified appraiser is someone authorized to complete Part III, Declaration of Appraiser, of Section B, which must also be included with the tax return in that event.

The IRS permits taxpayers to only deduct the fair market value of the donated  goods. Fair market value is the reasonable price that an ordinary buyer would pay for the item in a regular market situation such as at a flea market, on eBay, or at a thrift shop. Fair market value is not the original purchase cost but the second hand used price that could be obtained in an otherwise efficient market.

There are various  charts and valuation tables on the internet to help determine worth. Both The Salvation Army and Goodwill Industries provide assorted valuation guides on their web sites, which may be used as templates for approximating fair market value. You should keep in mind that the donated value is frequently much less than the original purchase price. If you want additional clarification, please take at look at the official IRS publications on the subject:

    * Publication 561, Determining the Value of Donated Property – Useful if you want to examine a few valuation scenarios.
    * Publication 526, Charitable Contributions – Addresses the entire subject of charitable donations and provides a useful background.

3) Deliver Your Donated item To The Charity – Most people donate clothing and other household products through charitable organizations such as their local church, or through Goodwill and the Salvation Army. I recommend visiting their websites to locate one of their many thrift shop locations nationwide where you can take your donated items. There is no need to make a reservation or appointment. Just deliver your items and your categorized list of items. Be sure you have properly compiled your list of donation items before bringing the items to the site. Don’t expect the charity to sort the items and do the work for you on the spot.

Usually, the way it works is you drop off your items at the donation site and a staff member provides you with a receipt upon request. Although you are not obligated to obtain a written receipt from the charity if the total value of the donated items is under $250, you should still always request one for record keeping purposes. Sometimes, but not always, they’ll make a note on the receipt for you about exactly what was dropped off, but the description is usually very general – such as “3 bags of clothing”. Other times, they will simply hand you a blank receipt for you to fill out.


4) Claim the Value Of Your Clothing Donation As A Charitable Deduction On Your Tax Return – Since you went through all the trouble of donating your item, be sure to take the appropriate deduction on your tax return when you file. To claim the charitable tax deduction, you will need to report the value of your donated item on Schedule A of Form 1040 as an itemized deduction. The total value of your charitable deductions cannot be more than 50 percent of your adjusted gross income in any single year. However, donations exceeding the 50 percent limit can be carried forward to future years.



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