Many charitable organizations advertise that they accept donations of vehicles or stocks around the end of the year. Donating to charity can both benefit your taxes and help support a valuable cause, but what restrictions are there on deducting charitable donations from your taxes? Take this quiz to see if you know the dollars and cents of charitable contributions and tax deductions.
In addition to what percent of your income you are allowed to deduct for charitable contributions, the tax code also identifies what organizations are eligible charities, and what types of donated items are deductible.
Charitable contributions can be money, but can also be donated goods or services. Work done for compensation, however, is not deductible.
All charitable contributions must be given to recognized organizations in order to be legally tax-deductible.
The tax code was changed recently to reflect the common overinflation of deductions on car donations. You must be very careful not to deduct too much.
After three years, you can no longer be audited, but during that three-year period, you should make sure you have receipts for all contributions. The burden of proof is on you.
If you donate something like stock, which could increase in value, your deductible percentage is more limited.
Contributions to private organizations have lower deduction caps than do those to public charities. If they show capital gains, the cap on such contributions is only 20 percent.
Virtually all donations to a 501(c)(3) organization may be deducted from your taxes, as long as you follow all other restrictions on deductions of charitable donations.
Only the portion of your donation that the organization receives, rather than what goes to pay for the hall and catering, is considered a deductible contribution.
In order to ensure that the claimed value is what the item is actually worth, more valuable goods must be professionally appraised.