Client Line Home Page - Deducting Donations

Tax savings may not be top of mind when you make a charitable contribution. But, if you can gain an income-tax advantage by helping a worthwhile cause, it's certainly icing on the cake.

Here are ten things to know about deducting donations on your federal income-tax return:

1. To deduct a charitable contribution, you have to itemize deductions on your return. (The deduction isn't available to taxpayers who claim the standard deduction.)

2. The organizations you give to must be "qualified" to receive tax-deductible contributions. These include nonprofit groups that are charitable, religious, educational, scientific, or literary in purpose or that work to prevent cruelty to children or animals.

3. Contributions of money or property (food, clothing, etc.) are potentially deductible. Clothing or household items generally must be in good used condition or better.

4. Property donations are generally deductible at fair market value, although the tax law contains exceptions for certain types of donations.

5. If you receive a benefit from the organization (dinner at a fundraising event, for example) in exchange for your contribution, you're generally required to subtract the value of the benefit from the amount you contributed to figure your deduction. There's an exception for small items the organization has determined (following IRS procedures) to be of token value.

6. Your deduction for charitable contributions is generally limited to 50% of your adjusted gross income (AGI), but in some cases a 20% or 30% limit may apply. Any amount you cannot claim because of the AGI limit may be carried forward for up to five tax years, subject to that year's AGI limit.

7. You must keep certain records to substantiate your donations for tax purposes.

8. Large gifts of property (over $5,000) require an appraisal.

9. Donations of motor vehicles, boats, or airplanes are subject to special tax law rules.

10. You can charge a charitable donation to your credit card or mail a check to the charity as late as December 31 and still gain a deduction on your 2011 return.