Top Tax Tips about Deducting Charitable Contributions

When you give a gift to charity, it not only helps others in need, it may also help you at tax time.  You may be able to claim the gift as a deduction that may lower your tax.  Here are tips you should know about deducting your gifts to charity.

1.       Qualified Charities.  You must donate to a qualified charity if you want to deduct the gift.  You can't deduct gifts to individuals, political organizations or candidates.  To check the status of a charity, use the IRS Select Check tool.

2.       Itemized Deduction.  To deduct your contributions, you must file Form 1040 and itemize deductions.  File Schedule A, Itemized Deductions, with your federal tax return.

3.       Benefit in Return.  If you get something in return for your donation, your deduction is limited.  You can only deduct the amount of your gift that is more than the value of what you got in return.  Examples of benefits include merchandise, meals, tickets to an event or other goods and services.  The cost of raffle tickets is not deductible.

4.       Donated Property.  If you gave property instead of cash, the deduction is usually that item's fair market value.  Fair market value is generally the price you would get if you sold the property on the open market or at a thrift store.

5.       Clothing and Household Items.  Used clothing and household items must be in at least good condition to be deductible in most cases.  Special rules apply to cars, boats and other types of property donations.

6.       Form 8283.  You must file Form 8283, Noncash Contributions, if your deduction for all noncash gifts is more than $500 for the year.

7.       Records to Keep.  You must keep records to prove the amount of the contributions you made during the year.  The kind of records you must keep depends on the amount and type of your donation.  For example, you must have a written record (receipt or acknowledgement letter) of any cash you donate, regardless of the amount, in order to claim a deduction.

8.       Donations of $250 or More.  To claim a deduction for donated cash or goods of $250 or more, you must have a written statement from the charity.  It must show the amount of the donation and a description of any property given. It must also say whether the organization provided any goods or services in exchange for the gift.

For more information, call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com

Are You Exempt From the Health Insurance Penalty?

As you’re probably well aware, the requirement under the Affordable Care Act (ACA) for individuals to obtain at least minimal health insurance coverage went into effect in January 2014. If you didn’t purchase a health insurance policy, you may have to pay a penalty with your 2014 federal income tax return.

But not everyone is required to pay the penalty. In fact, the list of exemptions is extensive. Here is a brief explanation of common exemptions.

●  Unaffordable coverage. The minimum amount you would have paid for employer-provided coverage or a “bronze level” plan exceeds 8% of your actual household income for the year.

●  Short coverage gap. You didn’t have coverage for less than three consecutive months during the year.

●  Income below filing threshold. Your gross income or household income is less than the applicable minimum threshold for filing a tax return.

●  Citizens living abroad and certain noncitizens. This exempts certain U.S. citizens, including those who spent more than 330 days abroad during a 12-month period and qualified noncitizen residents.

●  Incarcerated individuals. The requirement doesn’t apply to someone in a jail, prison, or similar penal institution.

●  Unaffordable aggregate self-only coverage. The aggregate cost of self-only employer-provided coverage for two or more family members exceeds 8% of household income.

●  Coverage gap. If you had a gap in your coverage at the beginning of 2014 but enrolled in the marketplace before May 1, you’re exempt.

●  General hardship. Circumstances such as homelessness, eviction, foreclosure, domestic violence, death of a close family member, or unpaid medical bills prevented you from obtaining coverage.

This list is not all-inclusive. For more information, call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com.