 Income tax 2021-2022, gifts to charity, part number three. Get ready to get refunds to the backs diving in to Income Tax 2021-2022. Most of this information can be found on Schedule A Instructions Tax Year 2021 on the IRS website at irs.gov, irs.gov. We're in the Income Tax formula focused in on the itemized deductions keeping them distinct in our mind from the adjustments to Income or the above the line deductions, Schedule 1 deductions or the deductions for adjusted gross income, noting that itemized deductions need to be greater than the standard deduction in order to benefit from them. Page 1 of the Form 1040, looking at Line 12A, standard deduction or itemized deduction, this is the Schedule A itemized deductions categories listed on the left hand side only taking the itemized deductions if greater than the standard deductions which would be taken back here. Page 1 on the Form 1040, noting we're looking at the itemized deduction of charitable contributions and that we usually think about them as an itemized category and have more capacity to get a bigger deduction there if we are itemizing, however if we're not itemizing we might be able to take some of charitable contributions here on Page 1 of the Form 1040. If we are itemizing on Schedule A, then we will take the deduction on Schedule A and typically have a larger threshold for which we can take a deduction. Schedule A itemized deductions for charitable contributions is where we're looking at here. Remember to keep in mind the standard deduction capacity to help determine whether or not it would be beneficial to itemize or not and if someone is not at capacity then they might not get the full benefit of the charitable contributions and might get the benefit on the first page of the Form 1040 as opposed to itemized deductions on Schedule A which is the deduction we're focused on here. So amounts you can't deduct, so now we're looking at those items which are saying hey, if I gave this amount out then would I be able to deduct it? This is in the no category. So certain contributions to charitable organizations to the extent that you receive a state or local tax credit in return for your contribution. So if you get a tax credit in return for the contribution then you've already got a benefit from it and if you were to get a deduction from it as well that would be kind of like the double dipping thing getting two benefits from the one thing again which you can't typically do. You can see publication 526 for more details and exceptions to that rule and amount paid to or for the benefit of a college or university in exchange for the right to purchase tickets to an athletic event in the college or university stadium. So you can imagine all kind of situations where people are trying to categorize something as a charitable contribution but they're really getting a benefit from it and typically if that was the case then it doesn't look like it's a charitable contribution it looks like it's an exchange, a market exchange and you don't get a benefit for a market exchange. So for example, obviously if you give money to a university and it's out of the goodness of your heart then it might be a charitable contribution to the university but if you're requiring them to build a statue in your likeness or something like that then it might not be as charitable or if you're getting obviously season tickets to the games or something like that you would think that looks more like an exchange as well. Other times when people try to do this you can imagine a situation if you had the money to do this you might try to give money to a charitable organization but somehow maintain the rights to have a very specific range of things that you want them to put the money in or you still have control over how they spend the money to a very specific degree. Again, that would kind of seem like you didn't really give the money away at that point in time so that's where it gets a little weird. So for most people that's not the case obviously if you give money to a charitable organization you're not given enough money that you have weight over so much of what they do with it and you might not be getting something like an exchange for that. Travel expenses including meals and lodging while away from home performing donated services unless there was no significant element of personal pleasure recreation or vacation in the travel. So possibly you have the travel expenses but again it's just like what you would see with a business travel kind of situation or medical travel kind of situation if for example you're traveling and you're going to the Bahamas and it looks a whole lot like a vacation but you're doing some kind of donation thing at the same time you would think you don't get to deduct the trip to the Bahamas especially those you can't deduct those drinks like in the coconuts as part at least that you would think wouldn't be deducted. So political contributions so we don't want to have the charitable contributions be a way to influence the political system and obviously again you can see where that's going to be some of the big problems on the higher income side of things where people when they give a charitable contribution it looks a lot like they're not actually giving a contribution they're buying influence and we don't want that we don't want to get a benefit for people buying influence because that seems kind of like an exchange and not a very good one to set a precedent for or get a deduction for or try to incentivize dues, fees or bills paid to country clubs lodges, fraternal orders or similar groups so if you're giving money to a country club or something like that it seems like dues to a country club and not for the use and so on to be part of the club and not as a charitable contribution out of the kindness and goodness of your heart then you would think you wouldn't be incentivizing a deduction like that cost of raffle, bingo or lottery tickets so the gambling kind of thing which is something that you might see done to generate revenue for a good purpose or something like that but the actual kind of gambling process itself is something that you would think that they wouldn't want to be incentivizing as a deductible item but you may be able to deduct these expenses on line 16 so you can take a look at line 16 later for more information on the gambling losses so if you can't get the deduction for the contributions here which are the charitable contributions you might say well can I get a deduction possibly for gambling losses and usually the rules there would be that it would have to be greater than the gambling you'd have to have losses that I'm sorry losses you'd have to have gambling winnings to match up the gambling losses to generally so we might touch on that a little bit more in a future presentation value of your time or services value of blood given to a blood bank so if you gave blood to the blood bank you can't deduct the value of blood but they literally took my blood it's my blood they should actually get a deduct whatever no can't get a deduct to transfer a future interest in tangible personal property generally no deduction is allowed until the entire interest has been transferred so if you transfer you know the property or say I will transfer the property in the future well you haven't transferred the property and we're kind of on like a cash flow basis or basis where the transaction typically has to take place in the year that you're getting the deduction generally also just realize that the value of your time or services that usually applies when you're talking about especially like non non professional services so if you go somewhere and you say I'm going to serve meals I'm going to dish up the soup I'm going to do that kind of stuff then that's considered like non professional services you don't generally get to deduct your time in that instances gifts to individuals and groups that are operated for personal profit gifts to foreign organizations however you may be able to deduct gifts to certain US organizations that transfer funds to foreign charities and certain Canadian, Israeli and Mexican charities so you can see publications there so in other words you can't really give to foreign entities because they're not under the organizational structure as a US you know not-for-profit organization but then you might say well that's I want to give to some benefit program that helps out what I want to help out which is in some other area that needs help well then you might be able to give to organizations which then have that purpose right they're a US organization that has the purpose of helping out in some way possibly by transferring then money to other organizations or possibly by getting in getting their hands in to some of these other areas themselves so you can see publication 526 for more details there gifts to organizations engaged in certain political activities that are of direct financial interest to your trade or business so if it's a direct financial interest doesn't look like of the kindness of your heart expanding showing money out to other people gets to groups whose purpose is the lobby for changes to the laws so this is that same kind of thing with the political contributions we don't want to incentivize people you know to be using their money in exchange for political contributions which kind of gets into the area of seems like kind of like bribes or something like that or you know lobbying gets kind of kind of fuzzy area in terms of that so we don't really want to incentivize and get of a deduction for people spending their money to buy political influence generally so gifts to civic leagues, social and sports clubs, labor unions and chamber of commerce value of benefits received in connection with a contribution to charitable organizations so you can see publication 526 for exceptions there cost of tuition however you may be able to take an educational credit so that we saw that before basically if you're saying I'm giving money to the university and they just gave then me classes that I can take for credit at the university well that's called buying you know your education that's not a deduction you didn't do that but you might be able to get a deduction there if you pay for education by possibly taking the lifetime learning credit or hope credit or something like that so we'll get into the credits later so that's where you probably get the better benefit there anyways because that'll be a credit as opposed to the deduction gifts by cash or check enter online 11 the total value of gifts you made in cash or by check including out of pocket gifts unless a limit deduction gifts applies to you for more information about the limit on deducting gifts see limit on the amount you can deduct earlier so in other words you're going to put your basically straightforward cash or check amounts here unless you hit that AGI limit phase out in which case then you'll have to deal with the AGI phase out you might have to carry some of the some of the amount forward in the future periods so if your deduction is limited you may have to carry over to next year see publication 5 26 for more information usually most people don't have that problem because if you're itemizing your incomes usually fairly substantial so that means that you could you know put a fair amount in before hitting the caps to to limit you to how much you can itemize because your AGI or just gross income or income is fairly high but deduct so we got gifts of cash or check deduction for gifts by cash or check limit if your deduction for the gifts you made in cash or by check is limited you can see publication 5 to 6 to figure the amount you can deduct only enter online 11 the deductible value of gifts you made in cash or by check record keeping for any contributions made in cash regardless of the amount you must maintain as a record of the contribution a bank record such as a cancel check or credit card statement or a written record from the charity so typically you're probably going to have both these days because notice when you make a deductible kind of kind of payment whether it be this kind of payment or any kind of deductible payment you typically don't want to make it by cash you want to make it with a check or you want to make it with a credit card or you want to make it with an electronic transfer because that gives you the audit trail automatically so then you can look up that information find it a lot more easily than just paying someone cash and you also would like to get the statement from the organization itself so that so that you have the backup and support for the payment and that way as well remember that the government doesn't usually like cash right the reason they're kind of moving to they're trying to try to get away from cash is basically because there's no audit trail with cash so so you could say so but when we're taking the deduction that's of course when you really want the audit trail right that they're worried about the audit trail with regards to the income satellite item of things because they want to make sure people are reporting the income side of things so so in any case you want to have the audit trail so that it'll be easy in the event that they come back for an audit you could show them and if you have an electronic transfer of some kind credit card or electronic transfer much easier the written record must include the name of the of the charity date and amount of the contribution if you make contributions through payroll deduction see publication 526 for information on the records you must keep don't attach the record to your tax return instead keep it with you for other records so you don't give that information of course to the IRS don't feel like you got to list out all your deductions and kind of staple it on to the return or something or attach it to your electronic return it's just there in the event that they audit you that you can pull it out and they could audit you statute of levitation is three years it could be longer than that so make sure you got the documentation settled up so if you looked at it three years later then it's still good so your contributions of 250 or more you must also have a contemporaneous written acknowledgement from the charitable organization see gifts of 250 dollars or more earlier you will still need to keep a record of when you made the cash contributions if the contemporaneous written acknowledgement doesn't include that information