Monday, March 25, 2013
It is that time of year again. It is tax season! So what does this mean for people who made donations to an exempt organization last year?
For people who itemize deductions on their federal tax return, one of the most popular deductions is the deduction for charitable gifts. However, for the donation to be deductible, the IRS requires the donation be made to a qualified charitable organization. To assist people wanting to utilize the charitable gift donation, the IRS has created an online search tool that enables people to find out whether the exempt charity to which they have donated is able to receive tax-deductible charitable contributions.
Generally, the IRS allows people to utilize the charitable gift deduction for donations of money and property made to a qualified charitable organization. While the value of cash donations are easily determined, donations of property must be determined by the property’s fair market value at the time of contribution.
Determining the value of the fair market value, and thus the benefit the donor stands to receive, is often a complex process and it raises interesting questions regarding the motives driving people to make donations of property. Do people donate property to an exempt organization because they believe in its purpose? Is it more likely that people donate property for tax benefits? If so, what are the benefits a person stands to receive from donating property? How are those benefits different from the benefits of donating money?