Yes, there’s still some good we Minnesotans can do for our 2016 tax returns — and for others — before the famous crystal ball drops in Times Square this weekend.
MAKE a cash donation; CONTRIBUTE unneeded clothing, etc. to a favorite charity. After all, it is the season of giving!
Many probably know that charitable contributions can be deducted on federal tax returns, but that works only if Joe or Jane Taxpayer is able to itemize deductions. (That’s done on Schedule A of the IRS Form 1040, by the way.)
For Minnesotans, the federal return is not the only opportunity. Here, the state tax code allows a limited tax break for donations by taxpayers who did not itemize on the federal return. There’s no double-dipping allowed. In order to claim that tax break, Minnesota taxpayers must use the standard deduction on their federal 1040s instead of itemizing to figure their taxes.
Minnesota’s Department of Revenue calls it a “subtraction” instead of a deduction. Taxpayers can subtract half (50 percent) of their total contributions over $500. (The first $500 in donations cannot be subtracted.)
To take the subtraction, they file Minnesota Form M1M. It’s a dense form, with more than 30 additions and subtractions, so we’ll steer you to Line 18 for charitable contributions.
The $500 threshold applies to individual and married couples filing jointly. But married spouses filing separate returns each must reach $500 in donations before subtracting.
As far as donations themselves, the rules are the same as for federal returns. The key to deducting is fair market value, EricJohn Ltd. owner Eric Buechler notes.
Cash and credit card donations are obvious. The contribution is just the dollar amount given.
Clothing and other goods are valued in current condition – not at the price tag when purchased new. The Internal Revenue Service reminds us that household items and apparel must be in “good, used condition” to be acceptable.
Here are a few details about deducting charitable gifts:
- Eligible charities: The IRS maintains a database called “Select check” at https://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check . In addition, churches and government agencies that are not shown also qualify.
- Money donations: A cancelled check or credit card statement with the name of the charity proves smaller donations. IRS wants an acknowledgment from the charity from $250 up.
- Household items: The charity’s statement is required for donations starting at $250. It’s best to get some type of acknowledgment slip for any donation. But, especially, if dropped at an unattended site, make sure to have a written record of the items and their estimated values. Also, Eric suggests taking a smart phone photo of them as a back-up. If the charity supplies a receipt, try to take the photo with it and the item together.