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Can you write off that charitable donation?
Before you add those donations to your schedule A, you should make sure they really are tax deductible
November 29, 2012
It’s that time of year just before tax season, and opportunities to participate in charitable events are plentiful.
Many local residents are cleaning out their closets and digging out receipts from charitable donations made during the tax year, in preparation for their visit to their tax consultant or certified public accountant.
Before taxpayers make a commitment to a deduction for tax purposes, they should know that in order to qualify for tax deductible status, an organization must fall under the designation of a 501(c)(3), which is usually referred to as a charitable organization. Organizations under this status, other than testing for public safety organizations, are eligible to receive tax-deductible contributions.
There are many guidelines and regulations that such an organization must adhere to. Essentially, taxpayers who are looking to donate and write off a charitable donation should make sure the non-profit they are donating to is indeed a 501(c)(3), or they could be in for an unpleasant surprise should they be counting on the donation to be tax-deductible.
Other exceptions include contributions and gifts to organizations such as schools and cultural organizations. Taxpayers should consult with their CPA or tax consultant if in question, because the waters get muddy where these non-profits are concerned.
Residents wishing to make donations in the form of clothes or other tangible items were given some candid advice from the staff at the local Soroptimist-owned and managed Neat Repeat Thrift Shop. These workers sort, organize, and handle donations on a daily basis. Manager Peggy McCutchen said that they recommend that donors call ahead if planning on large items for donations.
“We are glad to take whatever we can,” said McCutchen. She added that this doesn’t mean they take everything.
She pointed out that they get some bazaar items that show up at their door. Sadly enough, some people drop their trash off by the back receiving area.
“Ask for receipts when bringing in donations,” she added.
McCutchen said that many donors don’t ask, and come back later wanting a receipt. She indicated that they have to give receipts at the time the items are donated.
“A lot of them want receipts that they brought in throughout the year for stuff that they dropped off. We can’t do that.”
Some nuggets of information from a certified public accountant can be very useful for the taxpayer looking to benefit from charitable donations. Randy Higbe of Evans Bartlett, and CPAs, shared an IRS website that has a page that taxpayers can check to see if the organization is a tax-exempt organization. It is called “Exempt Organizations Select Check.” It is an online search tool that allows users to select an exempt organization to check information about their federal tax status and filings.
Higbe also shared another important, but often overlooked donation called Oregon Cultural Trust donation. This is a great return for taxpayers who qualify, and they can get the full credit against their tax liability on their state return. The limit is $500 for individuals, $1,000 for couples, and $2,500 for corporations.
“One word of caution with this credit,” said Higbe. “If you are taking a Federal Schedule A deduction for an Oregon Cultural Trust donation, you must add it back on your Oregon return if you are taking the credit. In other words, you cannot take the same donation as a deduction and a credit on your Oregon return. “
Crook County Historical Society, as well as a total of six organizations qualifies for this credit in Prineville.
Other donations that are a good deal for consumers are charitable auctions. The bidder can get well-above the fair market value of the item for a write-off, depending on the amount it sells for. Executive Director for the Prineville Hospital Foundation, Dalena Green, is involved with an annual event that includes an auction, and reminded the community that they can write off the difference between the fair market value and the amount that the item went for during the auction. For example, if a Christmas tree at an auction went for $800, and the actual cost of the ornaments and tree were $100, you write off $700.
Lastly, church tithes and gifts are often tax deductible, and many churches provide a statement at the end of the year. Higbe said that generally, churches are non-profits, but taxpayers should check with their church or look them up to see if they are a 501(c)(3).
Exempt Organizations Select Check : http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check.
Oregon Cultural Trust donation website: http://www.culturaltrust.org/.
Information on 501(c )(3) organizations: http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations