There are many deductions that individuals and businesses can qualify for. One example is claiming federal tax deductions made to churches or other qualified charitable organizations. A contribution can be in the form of money and also property. To claim a church deduction for federal taxes; itemization is required. Here are a few tips that will help you with claiming a church deduction.
1. Know if the church can receive deductible donations
In general, an organization that self-identifies as a church, temple, mosque, or other religious group qualifies for your tax-deductible donations. Be mindful that the church must be currently in operation and also meet the general operational definitions. If you’re unsure if a church you donated to qualified to receive your deductible donation, you can contact a tax attorney.
2. Calculate the minimum threshold level for itemizing deductions
For 2020, the standard deduction for a married couple filing jointly was $24,800, and for single people, it was $12,400. When calculating, if the sum of all your deductions is less than these figures, it may be best to choose the standard deduction. Itemize your deductions only if they exceed the minimum level.
3. Calculate maximum allowed deductions
In most cases, you can deduct as much as 50% of your adjusted gross income. There are some exceptions for fraternal organizations and certain private organizations, which have a limit of 30%. In the event you exceed 50% in one year, you may be eligible to carry forward the excess amount for up to five years.
4. Get written receipts for cash donations
Anytime you make a cash donation that is an amount over $250, request a receipt at the time of your donation. When making regular contributions to a church that are greater than $250, keep a record of that through either a checkbook register, donation diary, or bank statements. Some churches give their regular members donation envelopes for record-keeping of your donations. Churches will often provide you a written statement of the contributions you’ve made at the end of the year. Be mindful that you should still keep a personal record of cash donations less than $250.
5. Determine the fair market value
Donations of physical property such as clothing, furniture, or electronics are generally deductible. You need to deduct these items according to their fair market value. There sites online which can help you estimate a reasonable, fair market value for a variety of items. A reasonable value should be based on the quality of the item you’re donating. Valuation sites will offer a range of values from low numbers to high numbers. If you believe the physical property you’ve donated is in excellent condition, the value you select should be near the high end. If you know the item you gave was in fair or poor condition, the value selected should be near the low end.
If you’re still unsure, you can always see the prices of local stores that sell items similar to yours. It can be a good idea to keep a record of a few prices you find, along with the location and date of your visit, as proof of the value you apply to your deductions. If you donated clothing in good or excellent condition, consignment shops are good places to look for price ideas. For lower-priced clothing or items, use prices you see at a thrift shop to help you determine a value. If you donate clothing worth more than $500, it’s a good idea to have it appraised in case the donation is questioned. With non-cash donations that have a fair market value that exceeds $500, you need to complete IRS Form 8283 by the end of the year and then attach it to Form 1040.
6. Reporting donations valued at greater than $5,000
When making one donation of many items, or several separate donations, you have to calculate the total value of similar items as one donation. In the event that your categorized group exceeds $5000 in a year, you’ll need to get an appraisal of the items. As an example, individual furniture pieces are usually valued at around $50 to $1000. Individually, the items wouldn’t require an appraisal, but when donating multiple items, the total can potentially exceed $5,000, and then it would be required. Appraisals must be retrieved within 60 days before or after the date on which you made your donation. Additionally, it has to come from someone recognized by a professional organization. The appraiser will then need to complete IRS Form 8283 for each group of donated items that value over $5,000. It’s a good idea to photograph the items as a record of their quality. The IRS only allows deductions for items donated in good condition or better. A photograph can prove the quality of your donations was high enough to justify the amount you deducted.
7. Claiming deductions
To get your donations’ full benefit, you’ll need to itemize your deductions on your tax return. Charitable donations that are less than the standard deductions should just be claimed as standard deductions. As you prepare Form 1040, Schedule A needs to be completed to itemize your deductions. Church donations will be reported on lines 16 through 19. You’ll report the total of any cash donations on line 16, including donations made by check.
The physical property will be reported on line 17. Carryover from prior years is reported on line 18. You then add the amounts in lines 16, 17, and 18 and report the total on line 19. Review the instructions on Form 1040 to be sure that you’ve provided all the receipts and evidence required for your donations. Written statements need to be provided for cash donations exceeding $250. Receipts need to be provided for gifts of property over $250. Form 8283 needs to be completed for donations of property over $500.
Keeping all of your donations organized is a key part of recording them as deductions. Be sure to follow all of these guidelines when claiming a church deduction. Another important thing to remember with taxes is knowing how much you pay based on your tax bracket. You can learn more about that at this link: https://taxfyle.com/tax-bracket-calculator/.
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