As a tax consultant, I often get questions about the deductibility of items donated during the tax year. While the deductibility of some items are easy to determine, some transactions are not so easy to affirm. Below are five circumstances one will have to evaluate to determine the right deduction.
Raffle tickets cannot be designated as a donation. However, if you bought a losing raffle ticket, you are allowed a deduction, but only to the extent of the gains from wagering transactions. If you are not in the trade or business of wagering, this deduction is only allowable if you itemize deductions.
Volunteer Services – Out of pocket expenses
If you incur out of pocket expenses, you should receive a letter stating a description of the services provided by the taxpayer and a statement of whether or not you were provided with any goods and services. This letter is required to qualify your out of pocket expenses as tax deductions.
You can write off many out-of-pocket expenses you incur to do good work, including what you pay for materials, supplies, uniforms, stationery, stamps, parking, and tolls.
The general rule for tax purposes is that property is to be valued at its fair market value (FMV) at the time of contribution. If you place a restriction on the use of property, the amount of the charitable contribution deduction is the fair market value of the property at the time of the contribution established in light of the restriction
You cannot deduct charitable deduction for a contribution of real estate worth more than $5,000 unless you obtains a qualified appraisal of the property from a qualified. In addition to the appraisal requirements, you must attach a Form 8283 to the return on which the deduction is taken. You must include an appraisal summary.
Non publicly traded Stock
Taxpayers contributing non-publicly traded stock to charitable organizations can deduct only their basis, not the fair market value (FMV), if they did not obtain a qualified appraisal even though the FMV used was correct.
Household goods and clothing over $500
In general, you may not deduct any contribution of clothing or a household item unless such items are in good condition or better. The IRS may deny a deduction for any contribution of clothing or a household item which has minimal monetary value such as used socks and undergarments. An appraisal is needed for donations that exceed the $500 mark.