If you need assistance with charitable giving and charitable donations, or non-profits, contact Kevin M. Sayed, J.D., LL.M. Taxation, with Colombo Kitchin Attorneys at 252-353-1096. All materials below originally published by the Internal Revenue Service.
Issue Number: IRS Tax Tip 2016-47
Inside This Issue
If you gave money or goods to a charity in 2015, you may be able to claim a deduction on your federal tax return. Here are six important facts you should know about charitable donations.
- Qualified Charities. You must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible. An exception to this rule is contributions under the Slain Officer Family Support Act of 2015. To check the status of a charity, use the IRS Select Check tool.
- Itemize Deductions. To deduct your contributions, you must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with your federal tax return.
- Benefit in Return. If you get something in return for your donation, you may have to reduce your deduction. 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.
- Type of Donation. If you give property instead of cash, your deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price you would get if you sold the property on the open market. If you donate used clothing and household items, they generally must be in good condition, or better, to be deductible. Special rules apply to cars, boats and other types of property donations.
- Form to File and Records to Keep. You must file Form 8283, Noncash Charitable Contributions, for all noncash gifts totaling more than $500 for the year. If you need to prepare a Form 8283, you can prepare and e-file your tax return for free using IRS Free File. The type of records you must keep depends on the amount and type of your donation. To learn more about what records to keep see Publication 526.
- Donations of $250 or More. If you 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 you received any goods or services in exchange for the gift.
All material below originally published by the Internal Revenue Service. For help with debt related income, interest income, debt write-offs, or other business or personal debt tax matters, contact Kevin M. Sayed, J.D., LL.M. Taxation at 252-321-2020, at Colombo Kitchin Attorneys.
Issue Number: IRS Tax Tip 2016-30
Inside This Issue
Top 10 Tax Tips about Debt Cancellation
If your lender cancels part or all of your debt, it is usually considered income and you normally must pay tax on that amount. However, the law allows an exclusion that may apply to homeowners who had their mortgage debt cancelled in 2015. Here are 10 tips about debt cancellation:
- Main Home. If the cancelled debt was a loan on your main home, you may be able to exclude the cancelled amount from your income. You must have used the loan to buy, build or substantially improve your main home to qualify. Your main home must also secure the mortgage.
- Loan Modification. If your lender cancelled part of your mortgage through a loan modification or ‘workout,’ you may be able to exclude that amount from your income. You may also be able to exclude debt discharged as part of the Home Affordable Modification Program, or HAMP. The exclusion may also apply to the amount of debt cancelled in a foreclosure.
- Refinanced Mortgage. The exclusion may apply to amounts cancelled on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home and only up to the amount of the old mortgage principal just before refinancing. Amounts used for other purposes do not qualify.
- Other Cancelled Debt. Other types of cancelled debt such as second homes, rental and business property, credit card debt or car loans do not qualify for this special exclusion. On the other hand, there are other rules that may allow those types of cancelled debts to be nontaxable.
- Form 1099-C. If your lender reduced or cancelled at least $600 of your debt, you should receive Form 1099-C, Cancellation of Debt, by Feb. 1. This form shows the amount of cancelled debt and other information.
- Form 982. If you qualify, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. File the form with your federal income tax return.
- IRS.gov Tool. Use the Interactive Tax Assistant tool on IRS.gov to find out if your cancelled mortgage debt is taxable.
- Exclusion Extended. The law that authorized the exclusion of cancelled debt from income was extended through Dec. 31, 2016.
- IRS Free File. IRS e-file is fastest, safest and easiest way to file. You can use IRS Free File to e-file your tax return for free. If you earned $62,000 or less, you can use brand name tax software. The software does the math and completes the right forms for you. If you earned more than $62,000, use Free File Fillable Forms. This option uses electronic versions of IRS paper forms. It is best for people who are used to doing their own taxes. Free File is available only on IRS.gov/freefile.
- More Information. For more on this topic see Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments.