by Kelli Plasket
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With April 15 quickly approaching, many Lawrenceville residents are hastily filling out their tax return forms, eager to finish the often tedious process. In the rush, however, people often make mistakes or overlook details when trying to deduct the charitable contributions they made throughout the year, mistakes that could otherwise add up to a significant tax deduction.
The Internal Revenue Service emphasizes the importance of keeping a careful record of all charitable contributions given during the year, no matter the amount of the individual donation. According to Publication 526 from the IRS, titled “Charitable Contributions,” a new requirement for 2007 returns is retaining a record of any cash contribution, in addition to all other types of donations. However, according to the IRS, tax payers should not attach written acknowledgements to an individual income tax return, but retain it to validate the contribution.
Susan Ward, Office Manager for Liberty Tax Services in Hamilton, said in a February phone interview that the IRS is getting stricter about having a record of all donations made. Ward said this includes cancelled checks, receipts, or any other form of written verification. Additionally, she advised that when individuals donate non-monetary items in good condition, especially furniture and other large items, to charities such as Goodwill, they should get the value appraised for their records before donating.
Determining what donations qualify as deductible charitable contributions can be a challenge, but the IRS has detailed information on this on the IRS Web site. For example, individuals can deduct on money or property given to religious organizations (churches, temples, etc.), nonprofit schools and hospitals, public recreation facilities, war veterans’ groups, government (if used for public purposes), disaster relief, and organizations such as the Salvation Army, Red Cross, Goodwill, United Way, Boy/Girl Scouts, Boys and Girls Clubs, or any charitable organization listed in the IRS’s Publication 78.
However, if a donor receives a benefit in return for a donation, such as concert tickets, the fair market value of the benefit must be subtracted from the deduction. If the benefit is limited to providing the opportunity for the donor to also purchase an item of value, such as season tickets to a college football team’s home games, then the donor can deduct 80% of the original donation.
There are several Lawrenceville-based charities listed in Publication 78. These organizations include the Animal Rescue Coalition of NJ Inc., Bridge Academy Inc., The Lawrenceville School, Benjamin Franklin Elementary School Parent Teacher Organization, Friends of the Lawrence Branch of the Mercer County Library Inc, Friends of Lawrence High School Football Inc., Heart to Hearts Inc., HomeFront Inc., Lawrence Township Community Foundation Inc., Lawrence Township Education Foundation Inc., Lawrence Township Historical Society, Lawrence Township Meals on Wheels Inc., Mercer County Head Start, Prevention Education Inc., Princeton Area Community Foundation Inc., Special Olympics New Jersey Inc., United Way of Greater Mercer County Inc., and many more.
Individuals can also sometimes deduct un-reimbursed, out-of-pocket expenses, such as gas (deduct fourteen cents for each mile) and specialized uniforms, when serving one of these organizations as a volunteer, as well as some travel expenses for those representing an organization at a convention. Generally, nonprofit organizations that operate for religious, charitable, education, scientific, literary, and children/animal cruelty prevention purposes are qualified.
Taxpayers can also deduct some non-monetary donations, including clothes or household items in at least good, used condition, as well as some food donations. The IRS has guidelines for determining fair market value.
Ward said that a mistake Mercer county residents often make is trying to deduct on donations that are not deductible. For example, she said, donations made to political campaigns are not deductible, a significant one in this election year, nor are donations made to individuals, such as when organizations raise money to help an individual pay medical expenses.
According to the IRS, individuals also cannot deduct any money given toward civil leagues, political groups, social and sports clubs, labor unions, individuals, groups run for personal profit or to lobby for law changes, homeowner’s associations, tuition, dues or fees paid to lodges, fraternal orders, etc., or raffle, bingo, or lottery tickets. Value of time or services given to an organization or value of blood given to a blood bank also can’t be deducted, according to the IRS guidelines.
“The donations need to be made to an organization to benefit the greater good of society,” Ward said as a general rule of thumb in determining eligible deductions.
To deduct charitable contributions, taxpayers should fill out Form 1040, including the Schedule A attachment to itemize deductions. Any Lawrenceville resident in need of help with their tax forms can visit the local IRS Taxpayer Assistance Center, located on 44 South Clinton Avenue in Trenton. Businesses such as Liberty Tax Services also provide tax assistance. For more information on charitable deductions, click here to read IRS Publication 526.
