If you are considering donating to any charitable organization because it is a good deed, you should also consider that it will help you get good tax deductions. When considering charity, you must understand how to fill out Form 8283 from the IRS because it plays a significant role in getting any sort of deductions.
Now, whether it is just some clothes or a car that you are donating, there are many things you and your account must know about the 8283 tax form. Please read the article to learn more about it.
What Exactly Is Form 8283?
Form 8283 is for tax filers to help them make proper calculations for all their non-cash contributions and to gain appropriate compensation against their tax deductions.
Following are some items or goods that come under non-cash contributions to a charity:
- Artwork
- Vehicles
- Real estate or property
- Clothes
- Etc.
If any of these items are worth more than $500 when donated, you must file them in the tax return form if you want to be compensated for them. Anything you mention in this form as a donation must include a valuation certificate from an authorized third party. Because of the involvement of a qualified third party, the IRS has an easier time approving the 8283 Form.
Form 8283 Instructions
You can look at the following link for detailed instructions regarding Form 8283 provided by the IRS. This instruction link will contain all the details for each section you must complete. It will also include a checklist for all the documents you must attach.
It is in your interest to strictly follow these instructions so that you can make accurate reports and minimize errors.
On What Basis is the Valuation Cost Assessed for Non-Cash Donations?
There are many ways and aspects that you can consider, which you can find in the supplementing documents of Form 8283. Here are some bases for it:
- The donation's original value is based on when the donor acquired it, based on Fair Market Value (FMV).
- The IRS has limitations and specific requirements that need to be fulfilled for this valuation.
- The acquiring date of the asset or property.
- Did you buy the property, or was it a gift for you? It can also be an inheritance your family gave you.
- The rules may change based on the acquiring method.
- Accountants must read more details from the guidelines and publications provided by the IRS.
Rules for Non-Cash Donations for 8283 Tax Form
The following are some key rules a tax filer must consider when filing Form 8283.
Eligible Organizations
You can donate to only those organizations that are considered tax-exempt. The list is in the Internal Revenue Code of section 501(c)(3).
Documentation
As a tax filer, you must document all the documentation and certifications for all the donations separately. This documentation can include a certificate showing the item(s) you donated or an acknowledgment letter from the charity. This required document is necessary if your donation value exceeds $250.
Valuation
Getting a valuation from a third-party authorized professional or a company must evaluate the worth based on the FMV of the item(s). This becomes more necessary if the items in question are higher-value items.
Limitations
There is a limit on each item you donate, and it varies with the type of asset or property you are donating. So, no matter how much you contribute each year, you cannot exceed a certain limit on your tax deductions.
Qualified Appraisals
If you are donating a high-value item that exceeds $5,000, then the valuation must be done by a qualified appraiser. This appraiser's qualifications must meet the standards set by the IRS and follow the IRS's guidelines.
Substantiation Requirements
For anything above $5,000, additional information must be supplied besides the qualified appraisal. You need to mention the following details:
- The item's depreciation value.
- Fair market value.
- The date it was acquired.
- Some cost basis analysis.
Key Form 8283 FAQs
Why Do You Use the 8283 Form?
You use this form if you are a tax filer and have non-cash charitable contributions exceeding $500. Itemizing these contributions in this form is important because the IRS can approve some of these contributions and allow you tax deductions.
Who can File the 8283 Form?
Anyone can file this form, whether individuals, entities, partnerships, etc. Each form has a provision to mention and detail five donations. So if you have more than these, you should fill out more forms.
Which Contributions Will Require a Qualified Appraiser?
Any contribution to a tax-exempt charity or organization you have donated exceeds $5,000 in value. Because of their higher values, artwork, jewelry, or other gems always require an appraisal.
Can I Include My Voluntary Services in Form 8283?
You cannot, as services aren't considered donations and cannot be deducted for tax purposes. What you can get here are the expenses you spent on this service, such as fuel, food, or any other items you needed.
What is the Limit of Tax Deduction I Can Get From Non-Cash Donations?
It primarily depends on what asset or property you are donating. The rules will vary based on the value of that item and the method you used to acquire it. There are detailed guidelines to assess these.
Final Words
Certain items require an appraisal, while most donations only require receipts. If you have a stock item valued at $10,000 or less, you don't need an appraisal. Other than these, we have mentioned most items and methods to help you file a proper Form 8283 in your tax report.
