As the deadline to file your federal income tax looms, many individuals who gave money or goods to a charity in 2016 may be able to claim a deduction on their federal income taxes. If you intend to seek a deduction for your donations, here are some important facts to keep in mind when filling out your federal tax returns:
1. Itemized Deductions. In order to deduct charitable contributions, taxpayers must file a Form 1040 and itemize their deductions.
2. Qualified Charities. Not all types of donations qualify for a federal income tax deduction. Taxpayers must donate to a qualified charity to receive a deduction. Gifts to individuals, political organizations or candidates are not deductible.
3. Benefit in Return. If taxpayers get something in return for their donation, they may have to reduce their deduction. Taxpayers can only deduct the amount that exceeds the fair market value of the benefit received. Some examples of benefits include merchandise, meals, tickets to events or other goods and services.
4. Noncash Charitable Contributions. Taxpayers who give noncash gifts totaling more than $500 for the year must file Form 8283, Noncash Charitable Contributions.
5. Value of Property Donated. If taxpayers donate property instead of cash, their deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price they would get if the property sold on the open market.
6. Donations of $250 or More. If taxpayers donated cash or good of $250 or more, they must have a written statement from the charity. The written statement must show the amount of the donation and contain a description of any property given. The statement must also indicate whether the taxpayers received any goods or services in exchange for the donation.