Important Information on Tax Deductions
Notice: The United States Federal Law now requires all churches and religious organizations make available to the public at anytime supporting documentation they are not a private foundation but supported by the public, and can legally receive tax-deductible contributions through donations and grants. The Law indicates the internet can be used as a means to fulfill this requirement; therefore, we have included a link: 501(c)3 Determination Letter for public inspection of our non-profit status since May 1995. Contributions to this organization are tax-deductible.
The following paragraphs are information concerning the Tax Benefits of Contributions. This information is only a sample summary and is subject to change. If you desire a current detail explanation, visit the IRS website on Contributions you can Deduct:
Taxpayers who itemize, using Form 1040, Schedule A, are allowed a tax deduction for charitable contributions made during the tax year. This applies to both cash and non cash contributions. The contribution must be made to a recipient which is eligible to receive deductible contributions. The recipient may be religious, charitable, educational, governmental or other philanthropic organizations. If you need to verify the eligibility of the organization, the Internal Revenue Service can provide you with Publication 78 which lists acceptable organizations. IRS Publication 526, Charitable Contributions, should also be referred to for additional information.
All contributions of $250 or more must be substantiated by written acknowledgment from the organization receiving the contribution. The acknowledgment must state the amount of money or description of property and whether any consideration was given in exchange for the contribution.
If your non cash contribution is valued at $500 or more, you must complete and attach Form 8283, Noncash Charitable Contributions. For property with a value of $5,000 or more the donor will, in most situations, have to obtain a qualified appraisal to substantiate the value of the property. Publicly traded stock is one of the few exceptions to the qualified appraisal.
Record keeping: Taxpayers deducting contributions on their tax returns should also keep a receipt from the organization or a reliable written statement that shows the organization's name and address. Your written records should include:
- The method used to determine the property's value at the time you contributed the property. Copies of comparable sales prices or other documentation should also be retained in your tax records.
- The cost or other basis of the property, if you must reduce the cost, by any ordinary income or capital gain that would have resulted if the property had been sold at its fair market value.
- How you determined your deduction if you chose to reduce your deduction for gifts of capital gain property.
- Any conditions attached to the gift.
- No deduction is allowed for the value of benefits received from the qualified organization.
- If the property contributed has a fair market value that is less than your basis in the property, your deduction is limited to fair market value. You cannot claim a deduction for the difference between the property's basis and its fair market value.
- Property which has appreciated--Please contact your tax preparer.
- If your contributions are more than 20% of your adjusted gross income, the amount of your contribution may be limited to either 20%, 30%, or 50% of your adjusted gross income, depending on the type of property you give and the type of organization you give the property to.
- If your contributions are more than the applicable limits, you can carry over your contributions that you are not able to deduct in the current year, to a future year. You can deduct the excess contributions in each of the 5 succeeding years until the excess has been used up, but not beyond the 5 years.
Example: Personal computer and related software with a purchase price of $3,000, valued at $500 at time of contribution, receives a $500 deduction on Schedule A. A written receipt must be received and Form 8283 should be attached to your return.
Example: Business computer system, original purchase price $100,000, current value $10,000, adjusted tax basis of $15,000, receives a deduction of $10,000. A written receipt must be received and Form 8283 should be attached to your return. Since the value is over $5,000, an appraisal is required and should be made part of your tax records.
The above is a brief summary of the rules surrounding contributions of property. Please contact your tax advisor if you have any questions.