Not Made Of Money

Charitable deductions play an important part in many income tax returns. In essence, by helping someone else you can help yourself and reduce your tax liability. If you plan to make a charitable contribution in 2008 you can decrease your tax liability for this year. However, in order to take advantage of the tax benefits of your deduction you have to know the basic rules related to them.

There are several types of contributions that could result in a tax deduction. Cash donations and other donations are both eligible in some cases. Below are a few highlights to guide you through the issue. You should, however, discuss any contributions you make with your tax professional. He or she will be able to give you a definitive answer on the topic.

Receipts – You’ll need a receipt for each of your contributions, whether they are cash or something else. The receipt should include the date of the donation, a description of the donation, and acknowledgement that you didn’t receive anything in exchange for the donation. If this sounds too detailed, don’t worry; most charities already know what the receipt needs to say and will provide you everything you need. Just be sure to tell them you want a receipt.

Cash donations – Cash contributions are the easy tax deduction to justify. You don’t have to worry about estimating the value of the contribution because it’s inherent in the dollar amount. Again, just don’t forget to get a receipt.

Other donations – Material donations are just as eligible for tax deductions, but you’ll need to do a little more work. For instance, if you donate clothes to your local thrift store, the receipt they give you may say nothing more than “one box of clothing.” You’ll want to count and list the times in your contribution yourself. Then, you’ll need to make a fair market value assessment to determine how much your donations were worth. Your tax preparer will be able to guide you a little in this matter.

Large asset donations – Aside from the average donation to your local thrift store, some people donate major assets like cars or boats to their favorite charities. If you make this kind of contribution, there are other steps you will need to take to justify the worth of your donation. An appraisal might even be necessary if the item has enough value.
Volunteer work – As important as volunteer work is and as valuable as your time is, volunteer work is not eligible for a tax deduction.

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