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Tax deductions for donations

Posted by gammyt (My Page) on
Wed, Oct 22, 08 at 15:09

I looked on the IRS web site and couldn't find the answer to my question.

Our income this year will be lucky to be $60,000. How much would we have to donate to take a deduction on April 15th?

Say I donated a vehicle before April 15th that has blue book of $1000 and the charity sold it for $500. I could take the $500 as a deduction.

Would that give me anything back on next years taxes and if so how much?

Follow-Up Postings:

RE: Tax deductions for donations

I am not a tax expert but, as I understand the tax code, you are entitled to a "standard deduction" for donations. I do not remember how that is determined -- probably a percent of your AGI, adjust gross income. You do not need to prove donations to take standard deduction. So, you need to figure out what your standard deduction will be -- you can estimate it. Then figure whether the deduction for the car donation exceeds the standard deduction. If your standard deduction is higher, you might as well sell the car for whatever instead of donate it, and save yourself the trouble of proving the value of the donation, which can get complicated.

You can phone the IRS 800#. If you catch them at a time when they're not too busy, and you're lucky enough to get a knowledgeable person to take your question, you might get a more complete answer to your question. But don't count on it -- some of the people who answer the phone will just read to you the pertinent tax code rule, which you can do yourself from their website.

Some tax accountants who have done my returns take a very conservative position and advise not to take certain deductions even if you are entitled to them if the amount of money you save is small and if it increases a chance that the return will be audited. I agree with that.

RE: Tax deductions for donations

"save yourself the trouble of proving the value of the donation, which can get complicated. "

Actually, with a car, it is VERY simple. Ask the organization for a form that states the amount the car actually sold for at auction.

DH and I tithe, and have never - in 28 years of marriage - been audited. At what point do you run that risk? I can't imagine NOT taking deductions to which I am entitled!

RE: Tax deductions for donations

First, let me say I am not a tax expert. Second, I am pretty sure that you have to make the donation by the end of the calendar year.

From my personal experience, I have found that if you are not paying interest on a mortgage, you probably are taking the standard deduction and are not going to benefit tax wise from a donation. Here's why:

In order to get a tax deduction for this charitable donation, the total of ALL of your tax deductions have to total an amount above the Standard Deduction.

The Standard Deduction in 2007 was $5,350 for single person and $10,700 for a married couple. To gain any tax advantage from this donation, you would have to have deductions totalling more than $5,350/$10,700, which would be itemized on Schedule A and attached to your 1040 form.

If you don't know whether you itemized deductions or not, check the income tax form that you filed back in April. If you didn't file a Schedule A form along with the form 1040, then it means that you took the standard deduction.

Interest paid on a home mortgage is usually the largest deduction the average person claims. So if you are not paying interest on a mortgage, likely you are taking the standard deduction and are not going to get a tax benefit from this donation. That is not an absolute, because there are other deductions, but they seldom add up to an amount above the standard deduction.

Just to repeat - I am not an expert on this subject.

RE: Tax deductions for donations

Did you get any money back from the charity that sold your car? If not, you are entitled to deduct the fair market value of the vehicle.

However, if the value of your non-cash contribution (car) is more than $500, you must submit IRS form 8283, which includes an expert appraisal and valuation of the item (car).

You may find that it's easier to just say the value is $500. I make a number of charitable contributions throughout the year. I always total them and give the number to my tax preparer.

Remember, too, that if you got a benefit for your contribution, such as tickets to an event or a coffee mug or whatever, you muct deduct the value of the benefit from your contribution. If you gave $1000 and got two tickets to a dinner worth $250, the deductible amount is $750.

I'm no expert either, but I work for a non-profit organization and have learned a bit over the years. Still, don't rely only on what I have told you.

Here is a link that might be useful: Form 8283

RE: Tax deductions for donations

graywings: "From my personal experience, I have found that if you are not paying interest on a mortgage, you probably are taking the standard deduction and are not going to benefit tax wise from a donation....

Interest paid on a home mortgage is usually the largest deduction the average person claims."

You must not live in a state with high state & county income taxes. :-o

My Maryland income tax alone puts me over the $10,700 standard deduction threshold.

RE: Tax deductions for donations

We have always kept a good tally of our deductions, and also tithe. We had been keeping those tallies for years, and giving as much as we could feel comfortable giving, and found out after the fact that we usually did not exceed the standard deduction. We don't hold a mortgage, and that could be why.

Since finding that out (we have an accountant do our returns), I am more careful now on my timing for contributions, monies into an IRA, expenditures, capitol gains. I donate to charities/churches because I want to help them, but there is nothing wrong with also being able to use it to offset taxes if you can. I guess standard deductions are nice, but if you don't exceed them, even when you give generously, and others who don't give anything still get the same tax breaks......well, it sort of takes the hair off where fairness is concerned.

I have been known to make phone calls to my accountant to ask "Is this a good time to buy capital equipment?", "Is this a good time to make a withdrawal from a deferred account?" It really helps to sit down at times other than tax time, to crunch your numbers after the fact and project what your tax liabilites will be or how you can plan deductions to your best tax benefits. Like you are doing, btw. But a lot of people don't. Always run your household finances, like it were a business.

RE: Tax deductions for donations

Thank you all, we are married, have a mortgage and property taxes but sure can't deduct $10,700. Sounds like it would better financially if we sold her or just keep her for a back up.

Thanks again

RE: Tax deductions for donations

bethesdamadman - see, that's why I started and finished my post with the disclaimer. I completely forgot about deductions for state and county taxes - I live in Anne Arundel County and I feel your pain! Though I think your county tax is worse than mine.

RE: Tax deductions for donations

I believe there is a misunderstanding about standard deduction. You can take a standard deduction on your whole income tax return if you choose not to itemize your deductions. But even if you do itemize your deductions for interest on mortgage loans, local income taxes, etc., you can still take a standard deduction on donations, and when you do that you do not have to specify the recipients of your donations, or keep receipts. Only if your donations total more than the allowed standard deduction amount does it make sense to forego the standard deduction for donations and list the donations -- and make sure you keep documentation to prove those donations in case your return is audited. I believe this is accurate -- it's what I have been doing with the help of a tax accountant, so I'm pretty confident it's right. However, the tax code is so complicated even the experts sometimes make errors.

RE: Tax deductions for donations

There is NO standard deduction for donations. There is no standard amount you can claim if you itemize deductions. The IRS requires that you have a receipt from the organization or record such as a check or credit card receipt for every donation.

RE: Tax deductions for donations

haus proud - here is a link to a good synopsis of the issue from H&R Block.

There is no mention of a standard deduction for donations, and everything seems to indicate the opposite - that you must itemize your donations and have documentation that you made a donation.

Here is a link that might be useful: H&R Block on deductions

RE: Tax deductions for donations

haus, Despite what your tax accountant said, even I know there isn't a standard deduction for undocumented donations. If there was, when donating winter wear to the coat drive, or food to the food drive, the first question would not be "Do you want a tax receipt?"

You might want to find a new accountant who doesn't play with undocumented donations and hope the IRS doesn't look twice at your past returns.

RE: Tax deductions for donations

I stand corrected. I checked and found that I was mis-remembering the standard deduction thing. We did take the standard deduction, but since I am self-employed, I can still deduct business related expenses, and even with a standard deduction, you can separately deduct local income taxes.

The standard deduction is an alternative to itemized deductions in donations, medical expenses, mortgage interest expense, real estate tax and a few other things. We took the standard because in our case it didn't pay to itemize because our house is paid for, our medical expenses have been low, etc.

My apologies for the error. I hope I didn't add too much to the confusion.

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