Want a bigger refund this year?

Trying to figure a way to increase your refund or at least break even on your taxes this year?  Consider increasing your itemized deductions by making some charitable contributions.  You know, there is no point in keeping all that stuff around if it really is no longer of any use to you.   In one fell swoop you could kill three birds with one stone (animal lovers, this is figurative).   You would be:
- providing goods for those who are in need in this recessionary period
- reducing your clutter and
- increasing the deductions on your tax return if you itemize, which could decrease your tax liability.

Now remember that just about anything that has to do with your taxes has some conditions attached, check them out below to see if some additional moolah/dinero/benjamins are in your future.
  1. The organization that you contribute to, must be a qualified organization, for it to be deductible. They should be able to tell you if they are qualified, but for verification you can check or Search the IRS Publication 78 which lists most qualified organizations. If the organization can show you current 501(c)3 documentation, they should fall in the qualified category - and these include most churches, and public schools.  An organization may have had its qualification revoked however, check here to verify.  
  2. You have to be able to use the Form 1040, Schedule A which means that your total itemized deductions must exceed your standard deduction amount.  
  3. Cash contributions are generally deductible, and for property, the fair market value is what is used.   Donations after August 17, 2006 of household goods or clothing requires that they be in good condition or better.   No more slipping those socks with holes, or blouses with permanent stains, into the contribution box.  If you donate either a clothing or household item that has a fair market value of $500 or more - you may be required to prove that you had the item appraised for that value.    
  4. If you contribute to an event and your price of admission is included, or you receive goods and services in return, then your deduction is limited to the difference between your contribution and the fair market value of the benefit you received.   For example, if you make a contribution to Public Radio or Public TV and you accept the "thank you" gift, your contribution will be reduced by the fair market value of the "thank you" gift.  
  5. You have to be able to prove your contribution, so KEEP good records.  If you give "cash" - keep your bank records, credit card records, payroll records, and the dated receipts from the organization showing the amount contributed.   Actual cash contributions, e.g. dollar bills and coins placed in the Salvation Army's bell ringer's bucket cannot be verified, so they would not qualify for a deduction. You could however slip in a check and that would be a part of your record once its cancelled.
  6. Pledged amounts do not qualify for a deduction until they are paid, and only in the amount paid during the current tax year.  So, if you pledged $300 in July but only paid the charity $150 by Dec. 31, your deduction would only be $150.
  7. Now if you made a contribution by a credit card in October of the tax year, and you do not complete paying that credit card bill until the following year - you can definitely claim the full contribution amount made on the date you used your credit card. That also applies with a debit card - say you contribute an amount on December 29th of the tax year and your bank doesn't debit your account until January 2nd of the following year - you can still claim the full amount that you contributed on Dec. 29th.
  8. Any contribution in the amount of $250 or more, requires written documentation from the receiving organization to substantiate your donation.  Here's what you need to have in that documentation - the amount of cash you contributed or, a description of the goods and a good faith estimate of their value. The organization should also indicate whether you were provided any goods or services in return for your contribution.  The document should be dated and should show the date your contribution was received by the charity.
  9. If your items are valued at $500 or more you must complete and attach Form 8283 to your return.
  10. If your item is valued at $5000 or more - an appraisal is generally required, and you do have to complete and submit Section B of Form 8283.
So if you no longer have a use for that boat, that car, that skeleton of the armadillo, your size 6 wardrobe that you have not worn in the last 8 years or the furniture set that is taking up expensive real estate in storage or in the attic, put it on your to do list to pass those items on before December 31st this year.   Lets get that stuff moving!!

To help you figure out what your donated items may be worth, you can check out IRS information  here.   You may also want to take a look at the Goodwill Industries estimated value list of items most often donated.   The list presumes your item is in good condition or better.

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