Deductible Insurance for Charitable Donations:
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Follow the Tax Rules
Americans are extremely generous with their donations. Recent changes in the tax law, however, do affect which deductions you are allowed to claim. The Pennsylvania Institute of Certified Public Accountants PICPA offers some suggestions for complying with the new rules.
- Get It in Writing: You can only claim a charitable donation if you itemize on your tax return. In general, you are allowed to deduct your contributions of cash, checks, or other monetary gifts to a qualified tax-exempt organization. Under new rules, when you donate cash, you will need documentation. Documentation can be a receipt from the charity, a cancelled check, or a bank, credit union, or credit card statement showing the donation. The record must include the organization’s name, the amount of the contribution, and the date of the donation. If you donate through a payroll deduction, you will need documentation from your company showing how much was withheld, along with a pledge card that gives the name of the charity.
- Take Pictures: All non-monetary items donated to a charity should be in good, useable condition, and the IRS now requires taxpayers to prove this. CPAs advise that you photograph your donated items and make notes about their condition.
- Confirm the Value: In some cases, a receipt from a charity may not be sufficient to get a deduction. If you claim more than a $5,000 deduction for items other than readily valued property, the property must be appraised.
- Check the Group’s Qualifications: You can only deduct donations made to groups that the IRS considers to be “qualified.” In general, that means that the group must be a religious, charitable, educational, or other philanthropic organization approved by the IRS to receive deductible contributions.
Source: The Pennsylvania Institute of Certified Public Accountants PICPA.
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