The earthquake, tsunami and nuclear reactor fallout in Japan have created a national disaster, the damage of which is beyond comprehension. Millions of dollars have already been donated, and as you probably know the IRS recognizes the importance of donations to charitable organizations and allows certain donations to be itemized deductions. Obviously the important thing is that the Japanese affected by the disaster are getting the help they need, but while making your donation you might as well ensure you’re getting your full deduction!
1. The first thing to ensure is that the organization in which you are donating to is a qualified organization, as it must be religious, charitable, educational, scientific or literary in nature. In general it is safer to donate to the more established organizations such as the Red Cross, but you should be able to verify any organization’s charitable status through checking their website or through direct contact.
2. The second thing is to ensure that you obtain a receipt, as a receipt is necessary for any donation claimed on Schedule A of your tax return. For donations made through text messaging, a copy of your phone bill showing the donation made will suffice for your tax purposes.
Another factor to consider is that you can only deduct the entire amount of your donation if you do not receive anything of value in return for your donation. For example, if you donate $20 but receive a t-shirt worth $15 for the donation, you can only deduct the $5 in excess of the t-shirt’s value. For more complex transactions however, especially ones involving non-cash contributions such as property, stock, or other capital assets, don’t hesitate to contact our Irvine CPA firm and we will be more than happy to assist!