Itemizing Deductions Can Make a Big Difference on Your Tax Return

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Tax TimeIRS records show only about 26% of taxpayers itemize deductions. The majority of taxpayers take the standard deduction, which was $6,200 for single filers and $12,400 for joint filers in 2014. Taxpayers over age 65 could take a higher standard deduction – $7,750 for singles, $14,800 for married filing jointly.

The first step in maximizing tax deductions is to make sure you can itemize deductions – state and local taxes, medical expenses, home mortgage interest, and charitable deductions are some of the most common. Taxpayers who are charitable sometimes overlook deductions for their charitable efforts.

Here are some often overlooked ways to maximize your charitable deductions.

Fundraising events. The purchase of tickets to fundraising events may not be fully deductible. You can only deduct the portion of cost that exceeds the fair market value of the benefit (meal, show, etc.) as a charitable donation. The exception is if you decide not to use the tickets and give them back to the charity. The ticket must be returned to the charitable organization in order to deduct the full amount because you have not have received value for your payment. Be sure to obtain written documentation from the charitable organization for amounts exceeding $75.

Fundraisers at your home. Hosting a fundraiser or board meeting in your home entitles you to deduct the entire cost of food or the catering expenses as a charitable deduction. The 50% limit on entertainment and meal expenses doesn’t apply in this situation.

Transportation. You can write off the cost of gas, oil, repairs, insurance, etc. used in going to and from an organization at which you volunteer. A simpler method is taking the flat-rate deduction of 14 cents per mile (rate is the same for 2014 and 2015). You can also deduct transportation related expenses such as parking fees and tolls. Airfare, train and bus tickets to travel to charitable events or for volunteer activities can also be deducted. You also can deduct travel related expenses incurred while you were away from home performing services for a charitable group.

Charitable conventions. Related to transportation costs are the expenses you may be able to deduct for the cost of attending a convention on behalf of a charity if you’re an official delegate to the convention. The convention must be the primary purpose of the trip. Deductible costs include meals and lodging while you attend the convention.

Telephone. The entire cost of long-distance telephone calls, faxes, and cellphone charges made on behalf of a charity are deductible. Make sure you keep records of these charges and the purpose for which they were incurred. The entire cost of a telephone in your home is deductible if it is used solely for charitable purposes.

Foreign exchange students. Hosting a foreign exchange student in your home entitles you to a $50 per month deduction for each child attending high school. The student must live in your home under a written agreement with a qualified charity to be eligible for the deduction and they can’t be related to you.

Miscellaneous. The cost of buying and cleaning uniforms used in volunteer work is deductible. To qualify, the clothing cannot be suitable for everyday wear. Boy Scout or Girl Scout uniforms are good examples. Some out-of-pocket expenses are deductible, such as stationery and stamps you purchased so that your favorite nonprofit could send out a mailing.

Non-cash donations. Used books, clothing, kitchen equipment, etc. are deductible at fair market value when donated to charities. Be sure to use the true fair market value of your gift. Goodwill Industries and the Salvation Army maintain helpful guides for valuing commonly donated items. Online auction sites can also be helpful in pricing items, as well as IRS Publication 561. You should obtain a receipt for the donation. Tax law now requires donated household items be in good or better condition. The IRS could disallow contributions that don’t meet this standard. You can’t donate junk and take a tax deduction.

Non-deductible donations. Donations must be made to an IRS-qualified charity in order to be deductible. You can find a list of qualified charities in IRS Publication 78 or on the IRS website. You cannot write off contributions to individuals or a family experiencing a hardship. The value of your time spent volunteering or services you provided the group at no cost is also not deductible.

Interested in how your charitable giving compares to your income peer group? The chart below compares various income ranges and charitable giving as a percentage of income. Data compiled by the National Center for Charitable Statistics.

Chart Showing Total Contribution as Percentage of AGI

Rick’s Tips:

  • Taxpayers who itemize deductions should keep good records in order to take all of their legally allowed deductions.
  • Obtain written documentation from the charitable organization for donations exceeding $75, including receipts for non-cash donations.
  • Some of these deductions may be small and seem like they’re not worth your time. However, collectively they can add up and make a difference on your tax return.

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