 General Tips on Deducting Charitable Contributions

1. Contributions are deductible for the year in which they are actually paid or delivered. Pledges are not deductible until the year in which they are paid.

2. The value of volunteer time or services to a charitable organization is not deductible. However, out-of-pocket expenses directly related to voluntary service are usually deductible.

3. Contributions for which the donor receives a gift or other kinds of benefits are deductible only to the extent that the donation exceeds the value of any benefit received by the donor. (See "When Goods and Services are Involved..." for details.)

4. Direct contributions to needy individuals are not deductible. Contributions must be made to qualified organizations in order to be tax deductible.

5. Contributions made directly to foreign organizations are not deductible, except in the case of some Canadian organizations as specified in an agreement with that country. Also, donations to charities located in Puerto Rico, the Virgin Islands, and other U.S. possessions are deductible. Such organizations must meet the requirements for exemption under the income tax laws of the United States.

6. The "fair market value" of goods donated to a thrift store is deductible as long as the store is operated by a charity. To determine fair market value, visit a thrift store and check the "going rate" for comparable items. One cannot take a deduction if the goods are sold on a consignment basis whereby the original owner gets a percentage of the final sales price.

7. Donated property may generally be deducted at the fair market value of the property at the time of the contribution. In certain situations, additional details concerning the property's worth may need to be filed with the IRS in order to make a deduction on your federal income tax forms. Also, gifts of appreciated property are subject to special rules. See a financial advisor for additional details.

8. PAS advises donors to seek professional advice or to consult the IRS when in doubt about the deductibility of contributions. The following IRS pamphlets, available through local IRS offices, also provide useful information.

Pub. 448: "Federal Estate and Gift Taxes" Pub. 526: "Charitable Deductions" Pub. 529: "Miscellaneous Deductions" (e.g., political contributions, labor union dues as an employee expense) Pub. 535: "Business Expenses and Operating Losses" Pub. 557: "Tax-Exempt Status for Your Organization" Pub. 561: "Determining the Value of Donated Property" Pub. 585: "Voluntary Tax Methods to Help Finance Political Campaigns"

When Goods and Services are Involved...

A payment to a charity qualifies as a deductible gift only to the extent that it exceeds the fair market value of the privilege or benefit the "donor" receives in return for that gift. For example:  One cannot deduct the full amount paid to a charity for such items as candy or magazines. If the charity charges $10 for a box of candy that normally sells for $8, only $2 can be claimed as a charitable contribution.  The purchase price of tickets to a fund raising dinner, circus, or other meal or entertainment event is not fully deductible. Only the portion of the ticket price above the value of the meal or entertainment can be deducted for income tax purposes. The same rule applies even if, at the suggestion of the soliciting organization, the donor decides to let the charity give his or her tickets to underprivileged or disabled children.

Likewise, even if the charity refers to the entire purchase price as a "donation," the portion of the price that reflects the value of the admission is not deductible.  Membership dues that merely cover the cost of privileges or benefits received by the "donor" are not deductible. However, "dues" that actually constitute a contribution for which the donor receives little or no privilege or benefit of monetary value in return are deductible.  The price of participating in a raffle or similar drawing cannot be deducted as a charitable donation.

For further assistance, contact the Philanthropic Advisory Service of the Council of Better Business Bureaus.

Charitable Deductions Begin at Home Make sure your generosity during the coming year pays off as much as possible by rounding up all of your write-offs. The big contributions which translate to the big deductions are hard to overlook - what you give your church or synagogue or alma mater. But little expenses from your good-deed-doing can also mount up. Whether it's out-of-pocket contributions to a bell-ringer or what you pay for supplies while you're doing charitable work, if the money is going to help a qualified charitable organization, you get a deduction. If you drive your own car while doing volunteer work, you can deduct 14 cents a mile. Keep track of all your volunteer mileage - 14 cents for every mile is deductible as a charitable contribution. To make your record keeping easier, stop by participating H&R Block offices for a free mileage record book.

Charitable tax deductions can earn you some money back while helping out in your community. How much more golden could you become? Volunteer work is a valuable and important contribution to the community, it helps other people and makes you feel good. There are many ways of volunteering and they don’t have to involve being a candy striper at your local hospital. Many organizations need not only goods, but, professional services that can’t be provided by just anyone. If you are a professional or provide a service in your work, you can use your talents or provide your goods for volunteer work. If, for example, you are a lawyer, you can volunteer legal services to an organization. Likewise, if your company manufactures a product, it can be donated for a tax break. From babysitting to bookkeeping, you can contribute to your community. Though the most commonly deducted donations are monetary contributions, billable services and goods can also be used as tax- deductible donations if you keep good records and know your tax laws.

First, you need to determine if the organization you wish to donate your services to is eligible to receive tax deductible contributions. If your organization can’t give you the information you need, you can search for the company or organization’s name at the IRS’ web site. Most organizations are well established and will know if they are eligible to receive your goods and services for a tax deduction. Being tax- exempt does not mean the same thing as tax deductible, so be sure you have the correct information before you start. If your organization is not eligible to receive tax- deductible donations, they can apply through the IRS to become a 501(c)(3) organization. Most religious organizations are eligible for tax-deductible donations but are not required to register.

Keep record of every billable hour you work for your organization and provide receipts to your organization, keeping copies for your own tax records. If you don’t know how much to charge for your services, ask around at different companies or other folks who do the same job to get an idea how much is fair to deduct. Ask your accountant or IRS representative what percentage of your services can be deducted and if there is a limit. Depending upon your organization, you can deduct anywhere from 30 to 50 percent of your donation. Be sure to have all of your receipts available when it is tax time and in case of the dreaded audit.

Not only do volunteering goods and services provide a great tax deduction, it can also look good for your company’s record. Organizations often publicly acknowledge their benefactors; which brings you great publicity and more customers. People also like to patronize companies and professionals who are involved in the improvement of the community and will want to show their support for you by using your service or product.

Make it a regular policy to contribute whatever you can and try to get your employees involved as well. Often, people want to help but just don’t know how or what they can do. Provide a good example and a little direction and make a difference in your community.