Giving to charity can give back at tax-filing time

April 18 is the last day to file federal income tax forms. Americans have just over two months to wade through the paperwork and climb a mountain of receipts.

For those itemizing their deductions, charitable donations play an important role in filing. Giving to the greater good can give taxpayers a bit of money back at tax time. But there are common pitfalls and misconceptions that can keep people from getting the most from their charitable contributions.

First, all contributions, both cash and noncash, should be documented.

“Especially if they’re over $500,” said Jackie Payne, a certified public accountant at Begley, Young, Unterreiner & White in Cape Girardeau.

Only documented contributions can be itemized, but not all contributions are created equal. If a gift is received in return for a donation, the full amount of the donation cannot be claimed. On its website, the IRS states if a benefit is received, “then you can deduct only the amount that exceeds the fair market value of the benefit received.”

Congress, as part of the tax-extender bill passed last year, provided the ability of people older than 70.5 years to roll over up to $100,000 from their IRA to a charity tax-free, according to the Associated Press. Those who take advantage of the provision won’t have to count the distribution from the IRA as income. But there’s no double-dipping: If the direct donation is made, it cannot be deducted on a return.

“You have to take the right steps,” said Bill Schott, a CPA at Schott and Associates. “If you have a security, let’s say you paid a dollar a share for some stock, and it’s gone up to $100 a share. If you give that to your charity, you don’t have to pick up the capital gain on it. There are many, many things like that you can do.”

Then there is the matter of what constitutes a charitable organization.

“For the most part, any type of organization that’s a not-for-profit is deductible,” Payne said. “Churches, religious organizations and even federal, state and local governments can be contributions, as long as they’re solely for public purpose.”

Political contributions, she said, are not. Nor are civic leagues, sports clubs or homeowners associations.

Even with qualified not-for-profit organizations, the type of donation is pertinent. Money can’t be targeted to a particular individual, even if it’s going through a charity.

Donated goods usually are valued at fair-market value, according to the IRS. Clothing and household items must be in good condition to be deductible.

The donation of cars follows a different set of rules. In the case of a car, the deduction is not the fair value of the car but what the charitable organization sells it for, according to The Associated Press. If the organization gives the car to a needy family, the fair market value can be taken. In either case, the vehicle’s value must be substantiated.

There are also deductions that can be made that often are overlooked. Charitable travel can be reimbursed at 14 cents per mile, as well as other volunteer out-of-pocket expenses. A Girl Scout troop leader could claim the mileage spent on travel on a field trip, as well as the meals purchased while on the trip.

“As long as there’s not a significant element of personal pleasure taken from the deduction,” Payne explained.

But there is a limit to how much a person can claim as a charitable donation. This depends on a person’s income, Schott said.

“But you can carry the balance forward. So if you make a big contribution this year, but you don’t have enough income to cover all of it, what you can do is carry it forward and apply it to next year’s income. So you don’t lose the contribution if you don’t have the income stream to cover it.”

Itemized returns are not the best option for everyone.

“Generally speaking, the normal taxpayer, if he doesn’t have a lot of interest on his home, the itemized deductions don’t help,” Schott said.

bbrown@semissourian.com

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