Noncash Charitable Contributions

Picking up where we left off in our last blog, lets summarize charitable contributions of the noncash variety. These contributions can take many forms, but the record keeping for each is the same. If the tax man comes knocking on your door, you will want to have the following on file to substantiate your charitable contribution and related deductions:

1. Name of charitable organization
2. Date and location of contribution
3. Reasonably detailed description of contributed property
4. Fair market value (FMV) and the method used to value property
5. Cost or other basis

In addition to the above guidelines for record keeping, there are also important dollar figure break points that will determine what sort of documentation is required as follows:

• Less than $250: A receipt is not required where it is not practical to obtain one. An example would be at an unattended Goodwill drop location.
• $250 to $500: You must obtain written acknowledgement from the charity that contains the name and address of the organization, date and location of donation, and a description of the property.
• $501 to $5,000: The same requirements as above. Additionally, records must show how the donated property was acquired, the date acquired, and the adjusted cost basis of the donated property.
• More than $5,000: The same requirements as above. Additionally, most donations of property valued over $5,000 require an appraisal.
• Form 8283: If noncash contributions exceed $500 (in aggregate), then Form 8283 must be filed with your 1040 in order to properly claim these deductions

One common donation that falls into the noncash category is that of an automobile. The deduction amount available to the taxpayer depends on the how the vehicle is used by the charity set to receive the donation. No matter how the vehicle is eventually used, the taxpayer cannot claim any deduction above $500 for a donated vehicle unless Form 1098-C is filed. Form 1098-C must be provided within 30 days of the donation and the taxpayer must attach Copy B of this form to their 1040. How much can be deducted for the donation of a vehicle?

• The Donated Vehicle is Sold: If the charitable organization takes the donated vehicle and sells it without using it for charitable purposes, then the deduction to the taxpayer is limited to the gross proceeds realized from the sale of the vehicle. In this case, the fair market value of the donated vehicle is inconsequential. The gross sale proceeds amount is reported on line 4c of the Form 1098-C.
• The Donated Vehicle is Transferred to a Needy Individual: If the charitable organization donates or sells the vehicle for under FMV to a needy individual , then the gross proceeds rule does not apply. In this case, the FMV as of the date of the contribution can be used as the deduction amount.
• The Donated Vehicle is Used by the Charity: If the donated vehicle is used by charity, then it can be deducted at the FMV as of the date of contribution.

The above details will help you with your record keeping for noncash charitable contributions. We hope that as you plan your charitable contributions for the remainder of the year, you will keep these guidelines in mind and have your records in order. At the end of the day, the tax deduction is not the most important part of giving to charity, but it is a part that can help your tax position is you are charitably inclined. Labor Day weekend is right around the corner, so stay safe and enjoy your Holiday.

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