Tax Deductions

Gregory J. Cook, EA, CPA+
Accredited Tax Advisor
Past President Alabama Society of Enrolled Agents
Past President Alabama Association of Accountants

Contributions

Charitable contributions are deductible only if you itemize deductions on Form 1040, Schedule A. To be deductible, charitable contributions must be made to qualified organizations. See Publication 526, Charitable Contributions.

If your contribution entitles you to merchandise, goods, or services, including admission to a charity ball, banquet, theatrical performance, or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received. For a contribution of cash, check, or monetary gift (regardless of amount), you must maintain as a record of the contribution either a bank record or a written communication from the qualified organization. You generally can deduct the fair market value of any property you donate, as well as your cash contributions, to qualified organizations. See Publication 561, Determining the Value of Donated Property. For any contribution of $250 or more (including contributions of property), you must obtain a contemporaneous written acknowledgment from the qualified organization. One document may satisfy both the written communication requirement for monetary gifts and the contemporaneous written acknowledgement requirement for all contributions of $250 or more.

You must fill out Form 8283 (PDF) Section A, if your total deduction for all noncash contributions is more than $500. An appraisal generally must be done if you make a contribution of noncash property worth more than $5,000. In that case, you must also fill out Form 8283 Section B. Attach Form 8283 to your return.

For more information refer to Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property.

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Greg Cook

Greg Cook on the Recovery Act ...

The Recovery Act was passed by Congress and signed into law by President Obama on February 17, 2009. The purpose of the $787 billion Recovery package is to jump-start the economy to create and save jobs. The Act specifies appropriations for a wide range of federal programs, and increases or extends certain benefits under Medicaid, unemployment compensation, and nutrition assistance programs. The legislation also reduces individual and corporate income tax collections (to an extent), and makes a variety of other changes to tax laws.

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This Act will have far reaching consequences and we will be dealing with it for years to come (at least until 2018). Twenty-eight different agencies – such as the Departments of Education; Health and Human Services; and Energy – have been allocated a portion of the $787 billion in Recovery funds. Each agency develops specific plans for how it will spend its Recovery Act funds. The agencies then award grants and contracts to state governments or, in some cases, directly to schools, hospitals, contractors, or other organizations. The agencies are required to file weekly financial reports on how they are spending the money and their specific activities related to Recovery funds.

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Keeping Good Tax Records

You can avoid headaches at tax time by keeping track of your receipts and other records throughout the year. Good recordkeeping will help you remember the various transactions you made during the year, which in turn may make filing your return a less taxing experience.

Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.

In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return:

Bills, Credit card and other receipts, Invoices, Mileage logs, Canceled, imaged or substitute checks or any other proof of payment, and ...

Any other records to support deductions or credits you claim on your return.

Good recordkeeping throughout the year saves you time and effort at tax time when organizing and completing your return. If you hire a paid professional to complete your return, the records you have kept will assist the preparer in quickly and accurately completing your return.