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Business entities and individual taxpayers who donate over $500 worth of noncash charitable contributions to qualifying organizations must report their donations on IRS Form 8283.
There are no restrictions regarding the number of donations you can deduct on a tax return. But you must file a separate Form 8283 if you donate assets to more than five organizations. The maximum deduction you can claim can be, at most, 50% of your adjusted gross income.
As a result, you may be unable to deduct the entire value of your noncash donations in a single tax year. But you can carry their value to subsequent years.
Our guide to noncash charitable contributions will show you how to maximize your tax return with IRS Form 8283.
Table of Contents
The Core Concepts of Noncash Charitable Donations
As its name implies, a noncash contribution can be any property you donate to a qualifying organization. Educational, religious, literary, or charitable organizations, among others, meet the criteria of qualifying organizations.
IRS Publication 526 states that noncash contribution can include a single asset, such as a vehicle or a house, but it can also contain similar property items like books or clothes.
Stocks, bonds, exchange-traded funds, and mutual funds are also among noncash contributions businesses and individual taxpayers can deduct from their taxes.
On the other hand, out-of-pocket expenses created through voluntary or charitable work don’t qualify as noncash donations, and they must be reported as cash contributions.
Determining the Fair Market Value of Noncash Charitable Contributions
The IRS defines fair market value as ‘the price a willing, knowledgeable buyer would pay a willing, knowledgeable seller when neither has to buy or sell.’
The donor must determine the contribution’s FMV using an appropriate valuation method that establishes a realistic price for the donated property.
The IRS also differentiates between ordinary income and capital gain property, so you must determine the property’s type before evaluating its FMV. An ordinary income property can generate ordinary income or short-term capital for the organization if the donee chooses to sell it.
Capital gain property generates a long-term capital gain for the charitable organization, which affects how you determine its FMV. You must adhere to different rules when establishing the FMV of intellectual property, clothing, or vehicles.
Reasons to File IRS Form 8283
Partnerships, S corporations, and individuals can use IRS Form 8283 to declare the value of their charitable contributions if their donations exceed the $500 limit.
C corporations don’t have to file this form if their charitable contributions in a tax year are below the $5,000 mark. Preparing the form is optional if the total contribution amount is under these limits.
Moreover, you should refrain from using this form to figure out the contribution deduction amount because it aims to report all noncash charitable contributions you’ve made in a tax year. You can find the instructions on calculating the deduction amount in IRS Publication 526.
Business entities and individual taxpayers can list up to five donees on a single Form 8283 and use additional forms if they donate noncash property to more than five non-profit organizations.
The IRS retains the right to disallow the deduction if the receiving organization isn’t tax-exempt, the property’s FMV is too high, or if a taxpayer fails to provide the contemporaneous written acknowledgment (CWA) from the donee.
Hence, you won’t be able to deduct contributions to sports clubs, political organizations, and other for-profit organizations.
You can use the database of tax-exempt organizations on the IRS website to determine if you must file Form 8283 for the contribution you donated to a particular organization.
Your noncash donation may not qualify for the deduction if the clothes you donated aren’t in good used condition or better.
Filling Out Form 8283
Preparing Form 8283 starts with evaluating the worth of the gift you want to donate. Hence, you must know the property’s fair market value before contributing it to the organization.
For certain donations, you’ll also have to obtain the appraiser’s signature on Form 8283 to complete the form. The donee should send you the CWA by January 31 of the year following the donation.
It would help if you started filling out the form by entering the taxpayer’s name and identification number, either EIN or SSN, at the top. The document instructs taxpayers to determine the contribution deduction amount before completing it.
Section A
Taxpayers donating up to $5,000 should complete the form’s Section A. Please note that the limit applies per item or group of similar items.
You’ll have to fill out this part of the form if the noncash contribution is a vehicle, intellectual property, publicly traded security, or property held primarily for sale customers in the ordinary course of your business, even if the contribution’s value is above $5,000.
If the noncash contribution is a vehicle, you must attach Form 1098-C to Form 8283. Section A collects the following information:
- The names and addresses of all donees (up to five)
- Property description and its current condition
- The date of the contribution
- How and when the donor acquired the property
- Donor’s adjusted basis or cost
- Property’s fair market value and the method used to determine the fair market value
It’s paramount to fill out every field in Section A unless the value of the item you’re claiming is $500 or less. In this case, you don’t have to provide information regarding how and when you acquired the donated property or your adjusted basis.
Section B
You should skip the form’s Section A and only complete Section B if the value of your charitable contribution is higher than $5,000. You’d have to fill out multiple Forms 8283 if you donated more than one charitable contribution worth more than $5,000.
Art, securities, collectibles, clothing and household items, vehicles, and real estate are among the noncash charitable contributions you can claim in this section. The information you’ll need to complete this section is similar to the information necessary to complete Section A.
Depending on the type of donated property and its value, you may have to describe its physical condition at the time of the contribution and its appraised fair market value.
Donors who don’t gift the entire interest to the organization or restrict the organization’s use of that property must complete Part II of Section B and attach the required donee statement.
Appraisals and Donee Acknowledgments
Specific contributions such as art, collectibles, or real estate require an appraisal by a qualified appraiser. Attaching a written appraisal to Form 8382 isn’t necessary under the following conditions:
- Noncash contribution is an intellectual property.
- Suppose the donor obtains CWA for donated cars, airplanes, or boats. In that case, it will limit the deduction to the proceeds of the vehicle’s sales.
- Publicly traded securities (up to $10,000).
Submitting a written appraisal is mandatory for noncash contributions such as art or collectibles valued at over $20,000. Written value assessments are also compulsory for all deductions over $500,000 for noncash contributions to one or more donees.
Taxpayers donating clothing or household items not in good used condition or better must provide a written appraisal if the deduction they claim is higher than $500.
An appraisal of a noncash contribution must be completed two months before the item is gifted to a charitable organization. Moreover, the appraiser must fill out and sign Part IV of the form’s Section B before you can send the document to the IRS.
Donee Acknowledgement is the final part of Section B. An organization’s representative authorized to file tax returns on its behalf must complete this portion of Form 8382.
Limitations of Noncash Charitable Donations Deductions
Itemizing a noncash charitable contribution is the only way to deduct an asset’s value from your taxes. As a result, you cannot claim a standard deduction on your tax return if you want to make a contribution deduction.
The maximum deduction amount ranges from 20% to 50% of your adjusted gross income, so you may not be able to increase your tax refund for the entire value of the donation in a single year, but you can carry the deduction over for up to five years.
The IRS can only accept the deduction if you complete Form 8283 correctly, provide all supporting documentation, or correctly calculate the contribution’s FMV.
Frequently Asked Questions
These forms are different. Completing Form 8282 is a donee’s responsibility, while a donor of a noncash contribution fills out Form 8283.
You must file IRS Form 8283 with your tax return before the filing deadline, usually April 15. But you don’t have to submit this form before October 15 if you apply for the filing extension.
You must complete a separate Form 8283 for each noncash item you donate to a charitable organization unless the property is part of a group of similar items. If you donate gifts worth over $5,000 to multiple organizations, you must file a separate Form 8283 for each donee.
The information you must include in the donor statement depends on the type of donated property and its appraised value. Most donor statements contain a detailed description of the property and its original value.
Noncash Charitable Contributions and IRS Form 8283
The rules that determine when to file Form 8283 are simple. Taxpayers who donate more than $500 of noncash charitable contributions in a tax year, except C corporations, must attach this form to their tax returns.
The form only reports the gifts you make to qualifying organizations. But you can’t use it to calculate the tax deduction amount. The documentation you must attach to the form and which parts of the form you must complete depends on the type and size of a contribution. Filing Form 8283 can push you into a different tax bracket and generate substantial tax savings, but only if you establish the contribution’s value, obtain the necessary documents, and take all other steps to ensure the IRS approves your deduction.
Author:
Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.
