A great article from Watson CPA Group landed in my inbox this morning and I thought I would share it with you.
The IRS is quick to disqualify your non-cash charitable contributions if you do not have adequate records to support your donation. Here are five quick tips to ensure this does not happen to you.
- Get a receipt. Whenever you donate items of value please get a receipt from the charitable organization. It should include the name of the organization, the date of the gift, a general description of the item, and that you received nothing in return for your gift.
- Break out the items donated. Create a detailed list that includes when you acquired the donated item, the estimated value of the item when acquired, and how it was acquired.
- Take a picture of the donation. When itemizing the items to be donated, don’t forget to take a quick photo of the item. Title the photo and place the photo title on the list of items to be donated for cross-reference.
- Create a reasonable value of the donation. Use thrift shop values and online resale values for similar items from sites like e-bay to support your claim of value. Do not forget to provide a statement of condition. Your donated items should be in good or better condition.
- Know when special rules apply. If you donate an item of high value, you may need to obtain an appraisal. Donated vehicles and boats valued over $500 may require an approved Form 1098-C statement from the charity when they sell the vehicle. If they use the vehicle, you will want a print out of value from an approved vendor like Kelly Blue Book or NADA. If the value is over $5,000, you will want to get an independent appraisal of donated items. Donated stocks and mutual funds will need a statement of value from your investment company and from the charity receiving the goods.*
*Special caution: When donating appreciated stocks and mutual funds owned by you for over one year, do not sell the asset. Conduct a direct transfer of the certificates and have the charity sell the investment. This will maximize the value of your donation and avoid potential capital gain taxes.
They are a fabulous CPA group based in Colorado that works remotely with clients all across the US. If you'd like to read more of their advice on charitable contributions, they have an entire "knowledge base" on their website.
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