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H And R Block

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H And R Block

H and r block 2. H and r block   Source of Income Table of Contents Introduction Topics - This chapter discusses: Resident Aliens Nonresident AliensInterest Income Dividends Guarantee of Indebtedness Personal Services Transportation Income Scholarships, Grants, Prizes, and Awards Pensions and Annuities Rents or Royalties Real Property Personal Property Community Income Introduction After you have determined your alien status, you must determine the source of your income. H and r block This chapter will help you determine the source of different types of income you may receive during the tax year. H and r block This chapter also discusses special rules for married individuals who are domiciled in a country with community property laws. H and r block Topics - This chapter discusses: Income source rules, and Community income. H and r block Resident Aliens A resident alien's income is generally subject to tax in the same manner as a U. H and r block S. H and r block citizen. H and r block If you are a resident alien, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U. H and r block S. H and r block tax return. H and r block You must report these amounts from sources within and outside the United States. H and r block Nonresident Aliens A nonresident alien usually is subject to U. H and r block S. H and r block income tax only on U. H and r block S. H and r block source income. H and r block Under limited circumstances, certain foreign source income is subject to U. H and r block S. H and r block tax. H and r block See Foreign Income in chapter 4. H and r block The general rules for determining U. H and r block S. H and r block source income that apply to most nonresident aliens are shown in Table 2-1. H and r block The following discussions cover the general rules as well as the exceptions to these rules. H and r block Not all items of U. H and r block S. H and r block source income are taxable. H and r block See chapter 3. H and r block Interest Income Generally, U. H and r block S. H and r block source interest income includes the following items. H and r block Interest on bonds, notes, or other interest-bearing obligations of U. H and r block S. H and r block residents or domestic corporations. H and r block Interest paid by a domestic or foreign partnership or foreign corporation engaged in a U. H and r block S. H and r block trade or business at any time during the tax year. H and r block Original issue discount. H and r block Interest from a state, the District of Columbia, or the U. H and r block S. H and r block Government. H and r block The place or manner of payment is immaterial in determining the source of the income. H and r block A substitute interest payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as the interest on the transferred security. H and r block Exceptions. H and r block   U. H and r block S. H and r block source interest income does not include the following items. H and r block Interest paid by a resident alien or a domestic corporation on obligations issued before August 10, 2010, if for the 3-year period ending with the close of the payer's tax year preceding the interest payment, at least 80% of the payer's total gross income: Is from sources outside the United States, and Is attributable to the active conduct of a trade or business by the individual or corporation in a foreign country or a U. H and r block S. H and r block possession. H and r block However, the interest will be considered U. H and r block S. H and r block source interest income if either of the following apply. H and r block The recipient of the interest is related to the resident alien or domestic corporation. H and r block See section 954(d)(3) for the definition of related person. H and r block The terms of the obligation are significantly modified after August 9, 2010. H and r block Any extension of the term of the obligation is considered a significant modification. H and r block Interest paid by a foreign branch of a domestic corporation or a domestic partnership on deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law if the interest paid or credited can be deducted by the association. H and r block Interest on deposits with a foreign branch of a domestic corporation or domestic partnership, but only if the branch is in the commercial banking business. H and r block Dividends In most cases, dividend income received from domestic corporations is U. H and r block S. H and r block source income. H and r block Dividend income from foreign corporations is usually foreign source income. H and r block Exceptions to both of these rules are discussed below. H and r block A substitute dividend payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as a distribution on the transferred security. H and r block Dividend equivalent payments. H and r block   U. H and r block S. H and r block source dividends also include all dividend equivalent payments. H and r block Dividend equivalent payments include substitute dividends, payments made pursuant to a specified notional principal contract, and all similar payments that, directly or indirectly, are contingent on or determined by reference to, the payment of a dividend from U. H and r block S. H and r block sources. H and r block    The Internal Revenue Service has issued final regulations that would affect the treatment of dividend equivalent payments and specified notional principal contracts. H and r block You can view this regulation at www. H and r block irs. H and r block gov/irb/2013-52_IRB/ar08. H and r block html. H and r block First exception. H and r block   Dividends received from a domestic corporation are not U. H and r block S. H and r block source income if the corporation elects to take the American Samoa economic development credit. H and r block Second exception. H and r block   Part of the dividends received from a foreign corporation is U. H and r block S. H and r block source income if 25% or more of its total gross income for the 3-year period ending with the close of its tax year preceding the declaration of dividends was effectively connected with a trade or business in the United States. H and r block If the corporation was formed less than 3 years before the declaration, use its total gross income from the time it was formed. H and r block Determine the part that is U. H and r block S. H and r block source income by multiplying the dividend by the following fraction. H and r block   Foreign corporation's gross income connected with a U. H and r block S. H and r block trade or business for the 3-year period     Foreign corporation's gross income from all sources for that period   Guarantee of Indebtedness Certain amounts received directly or indirectly, for the provision of a guarantee of indebtedness issued after September 27, 2010, are U. H and r block S. H and r block source income. H and r block They must be paid by a noncorporate resident or U. H and r block S. H and r block corporation or by any foreign person if the amounts are effectively connected with the conduct of a U. H and r block S. H and r block trade or business. H and r block For more information, see Internal Revenue Code sections 861(a)(9) and 862(a)(9). H and r block Personal Services All wages and any other compensation for services performed in the United States are considered to be from sources in the United States. H and r block The only exceptions to this rule are discussed in chapter 3 under Employees of foreign persons, organizations, or offices, and under Crew members. H and r block If you are an employee and receive compensation for labor or personal services performed both inside and outside the United States, special rules apply in determining the source of the compensation. H and r block Compensation (other than certain fringe benefits) is sourced on a time basis. H and r block Certain fringe benefits (such as housing and education) are sourced on a geographical basis. H and r block Or, you may be permitted to use an alternative basis to determine the source of compensation. H and r block See Alternative Basis , later. H and r block Multi-level marketing. H and r block   Certain companies sell products through a multi-level marketing arrangement, such that an upper-tier distributor, who has sponsored a lower-tier distributor, is entitled to a payment from the company based on certain activities of that lower-tier distributor. H and r block Generally, depending on the facts, payments from such multi-level marketing companies to independent (non-employee) distributors (upper-tier distributors) that are based on the sales or purchases of persons whom they have sponsored (lower-tier distributors) constitute income for the performance of personal services in recruiting, training, and supporting the lower-tier distributors. H and r block The source of such income is generally based on where the services of the upper-tier distributor are performed, and may, depending on the facts, be considered multi-year compensation, with the source of income determined over the period to which such compensation is attributable. H and r block Self-employed individuals. H and r block   If you are self-employed, you determine the source of compensation for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. H and r block In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. H and r block Time Basis Use a time basis to figure your U. H and r block S. H and r block source compensation (other than the fringe benefits discussed later). H and r block Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed services in the United States during the year     Total number of days you performed services during the year   You can use a unit of time less than a day in the above fraction, if appropriate. H and r block The time period for which the compensation is made does not have to be a year. H and r block Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. H and r block Example 1. H and r block Christina Brooks, a resident of the Netherlands, worked 240 days for a U. H and r block S. H and r block company during the tax year. H and r block She received $80,000 in compensation. H and r block None of it was for fringe benefits. H and r block Christina performed services in the United States for 60 days and performed services in the Netherlands for 180 days. H and r block Using the time basis for determining the source of compensation, $20,000 ($80,000 × 60/240) is her U. H and r block S. H and r block source income. H and r block Example 2. H and r block Rob Waters, a resident of South Africa, is employed by a corporation. H and r block His annual salary is $100,000. H and r block None of it is for fringe benefits. H and r block During the first quarter of the year he worked entirely within the United States. H and r block On April 1, Rob was transferred to Singapore for the remainder of the year. H and r block Rob is able to establish that the first quarter of the year and the last 3 quarters of the year are two separate, distinct, and continuous periods of time. H and r block Accordingly, $25,000 of Rob's annual salary is attributable to the first quarter of the year (. H and r block 25 × $100,000). H and r block All of it is U. H and r block S. H and r block source income because he worked entirely within the United States during that quarter. H and r block The remaining $75,000 is attributable to the last three quarters of the year. H and r block During those quarters, he worked 150 days in Singapore and 30 days in the United States. H and r block His periodic performance of services in the United States did not result in distinct, separate, and continuous periods of time. H and r block Of this $75,000, $12,500 ($75,000 × 30/180) is U. H and r block S. H and r block source income. H and r block Multi-year compensation. H and r block   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. H and r block Multi-year compensation is compensation that is included in your income in one tax year but that is attributable to a period that includes two or more tax years. H and r block   You determine the period to which the compensation is attributable based on the facts and circumstances of your case. H and r block For example, an amount of compensation that specifically relates to a period of time that includes several calendar years is attributable to the entire multi-year period. H and r block   The amount of compensation treated as from U. H and r block S. H and r block sources is figured by multiplying the total multi-year compensation by a fraction. H and r block The numerator of the fraction is the number of days (or unit of time less than a day, if appropriate) that you performed labor or personal services in the United States in connection with the project. H and r block The denominator of the fraction is the total number of days (or unit of time less than a day, if appropriate) that you performed labor or personal services in connection with the project. H and r block Geographical Basis Compensation you receive as an employee in the form of the following fringe benefits is sourced on a geographical basis. H and r block Housing. H and r block Education. H and r block Local transportation. H and r block Tax reimbursement. H and r block Hazardous or hardship duty pay as defined in Regulations section 1. H and r block 861-4(b)(2)(ii)(D)(5). H and r block Moving expense reimbursement. H and r block The amount of fringe benefits must be reasonable and you must substantiate them by adequate records or by sufficient evidence. H and r block Principal place of work. H and r block   The above fringe benefits, except for tax reimbursement and hazardous or hardship duty pay, are sourced based on your principal place of work. H and r block Your principal place of work is usually the place where you spend most of your working time. H and r block This could be your office, plant, store, shop, or other location. H and r block If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work. H and r block   If you have more than one job at any time, your main job location depends on the facts in each case. H and r block The more important factors to be considered are: The total time you spend at each place, The amount of work you do at each place, and How much money you earn at each place. H and r block Housing. H and r block   The source of a housing fringe benefit is determined based on the location of your principal place of work. H and r block A housing fringe benefit includes payments to you or on your behalf (and your family's if your family resides with you) only for the following. H and r block Rent. H and r block Utilities (except telephone charges). H and r block Real and personal property insurance. H and r block Occupancy taxes not deductible under section 164 or 216(a). H and r block Nonrefundable fees for securing a leasehold. H and r block Rental of furniture and accessories. H and r block Household repairs. H and r block Residential parking. H and r block Fair rental value of housing provided in kind by your employer. H and r block   A housing fringe benefit does not include: Deductible interest and taxes (including deductible interest and taxes of a tenant-stockholder in a cooperative housing corporation), The cost of buying property, including principal payments on a mortgage, The cost of domestic labor (maids, gardeners, etc. H and r block ), Pay television subscriptions, Improvements and other expenses that increase the value or appreciably prolong the life of property, Purchased furniture or accessories, Depreciation or amortization of property or improvements, The value of meals or lodging that you exclude from gross income, or The value of meals or lodging that you deduct as moving expenses. H and r block Education. H and r block   The source of an education fringe benefit for the education expenses of your dependents is determined based on the location of your principal place of work. H and r block An education fringe benefit includes payments only for the following expenses for education at an elementary or secondary school. H and r block Tuition, fees, academic tutoring, special needs services for a special needs student, books, supplies, and other equipment. H and r block Room and board and uniforms that are required or provided by the school in connection with enrollment or attendance. H and r block Local transportation. H and r block   The source of a local transportation fringe benefit is determined based on the location of your principal place of work. H and r block Your local transportation fringe benefit is the amount that you receive as compensation for local transportation for you or your spouse or dependents at the location of your principal place of work. H and r block The amount treated as a local transportation fringe benefit is limited to actual expenses incurred for local transportation and the fair rental value of any employer-provided vehicle used predominantly by you, your spouse, or your dependents for local transportation. H and r block Actual expenses do not include the cost (including interest) of any vehicle purchased by you or on your behalf. H and r block Tax reimbursement. H and r block   The source of a tax reimbursement fringe benefit is determined based on the location of the jurisdiction that imposed the tax for which you are reimbursed. H and r block Moving expense reimbursement. H and r block   The source of a moving expense reimbursement is generally based on the location of your new principal place of work. H and r block However, the source is determined based on the location of your former principal place of work if you provide sufficient evidence that such determination of source is more appropriate under the facts and circumstances of your case. H and r block Sufficient evidence generally requires an agreement between you and your employer, or a written statement of company policy, which is reduced to writing before the move and which is entered into or established to induce you or other employees to move to another country. H and r block The written statement or agreement must state that your employer will reimburse you for moving expenses that you incur to return to your former principal place of work regardless of whether you continue to work for your employer after returning to that location. H and r block It may contain certain conditions upon which the right to reimbursement is determined as long as those conditions set forth standards that are definitely ascertainable and can only be fulfilled prior to, or through completion of, your return move to your former principal place of work. H and r block Alternative Basis If you are an employee, you can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your compensation than the time or geographical basis. H and r block If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your compensation. H and r block Also, if your total compensation from all sources is $250,000 or more, check “Yes” to both questions on line K on page 5 of Form 1040NR, and attach a written statement to your tax return that sets forth all of the following. H and r block Your name and social security number (written across the top of the statement). H and r block The specific compensation income, or the specific fringe benefit, for which you are using the alternative basis. H and r block For each item in (2), the alternative basis of allocation of source used. H and r block For each item in (2), a computation showing how the alternative allocation was computed. H and r block A comparison of the dollar amount of the U. H and r block S. H and r block compensation and foreign compensation sourced under both the alternative basis and the time or geographical basis discussed earlier. H and r block Transportation Income Transportation income is income from the use of a vessel or aircraft or for the performance of services directly related to the use of any vessel or aircraft. H and r block This is true whether the vessel or aircraft is owned, hired, or leased. H and r block The term “vessel or aircraft” includes any container used in connection with a vessel or aircraft. H and r block All income from transportation that begins and ends in the United States is treated as derived from sources in the United States. H and r block If the transportation begins or ends in the United States, 50% of the transportation income is treated as derived from sources in the United States. H and r block For transportation income from personal services, 50% of the income is U. H and r block S. H and r block source income if the transportation is between the United States and a U. H and r block S. H and r block possession. H and r block For nonresident aliens, this only applies to income derived from, or in connection with, an aircraft. H and r block For information on how U. H and r block S. H and r block source transportation income is taxed, see chapter 4. H and r block Scholarships, Grants, Prizes, and Awards Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds. H and r block However, see Activities to be performed outside the United States , later. H and r block For example, payments for research or study in the United States made by the United States, a noncorporate U. H and r block S. H and r block resident, or a domestic corporation, are from U. H and r block S. H and r block sources. H and r block Similar payments from a foreign government or foreign corporation are foreign source payments even though the funds may be disbursed through a U. H and r block S. H and r block agent. H and r block Payments made by an entity designated as a public international organization under the International Organizations Immunities Act are from foreign sources. H and r block Activities to be performed outside the United States. H and r block   Scholarships, fellowship grants, targeted grants, and achievement awards received by nonresident aliens for activities performed, or to be performed, outside the United States are not U. H and r block S. H and r block source income. H and r block    These rules do not apply to amounts paid as salary or other compensation for services. H and r block See Personal Services, earlier, for the source rules that apply. H and r block Pensions and Annuities If you receive a pension from a domestic trust for services performed both in and outside the United States, part of the pension payment is from U. H and r block S. H and r block sources. H and r block That part is the amount attributable to earnings of the pension plan and the employer contributions made for services performed in the United States. H and r block This applies whether the distribution is made under a qualified or nonqualified stock bonus, pension, profit-sharing, or annuity plan (whether or not funded). H and r block If you performed services as an employee of the United States, you may receive a distribution from the U. H and r block S. H and r block Government under a plan, such as the Civil Service Retirement System, that is treated as a qualified pension plan. H and r block Your U. H and r block S. H and r block source income is the otherwise taxable amount of the distribution that is attributable to your total U. H and r block S. H and r block Government basic pay other than tax-exempt pay for services performed outside the United States. H and r block Rents or Royalties Your U. H and r block S. H and r block source income includes rent and royalty income received during the tax year from property located in the United States or from any interest in that property. H and r block U. H and r block S. H and r block source income also includes rents or royalties for the use of, or for the privilege of using, in the United States, intangible property such as patents, copyrights, secret processes and formulas, goodwill, trademarks, franchises, and similar property. H and r block Real Property Real property is land and buildings and generally anything built on, growing on, or attached to land. H and r block Gross income from sources in the United States includes gains, profits, and income from the sale or other disposition of real property located in the United States. H and r block Natural resources. H and r block   The income from the sale of products of any farm, mine, oil or gas well, other natural deposit, or timber located in the United States and sold in a foreign country, or located in a foreign country and sold in the United States, is partly from sources in the United States. H and r block For information on determining that part, see section 1. H and r block 863-1(b) of the regulations. H and r block Table 2-1. H and r block Summary of Source Rules for Income of Nonresident Aliens Item of income Factor determining source Salaries, wages, other compensation Where services performed Business income:   Personal services Where services performed Sale of inventory—purchased Where sold Sale of inventory—produced Allocation Interest Residence of payer Dividends Whether a U. H and r block S. H and r block or foreign corporation* Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. H and r block Where property is used Sale of real property Location of property Sale of personal property Seller's tax home (but see Personal Property , later, for exceptions) Pension distributions attributable to contributions Where services were performed that earned the pension Investment earnings on pension contributions Location of pension trust Sale of natural resources Allocation based on fair market value of product at export terminal. H and r block For more information, see section 1. H and r block 863-1(b) of the regulations. H and r block *Exceptions include: a) Dividends paid by a U. H and r block S. H and r block corporation are foreign source if the corporation elects the  American Samoa economic development credit. H and r block  b) Part of a dividend paid by a foreign corporation is U. H and r block S. H and r block source if at least 25% of the  corporation's gross income is effectively connected with a U. H and r block S. H and r block trade or business for the  3 tax years before the year in which the dividends are declared. H and r block Personal Property Personal property is property, such as machinery, equipment, or furniture, that is not real property. H and r block Gain or loss from the sale or exchange of personal property generally has its source in the United States if you have a tax home in the United States. H and r block If you do not have a tax home in the United States, the gain or loss generally is considered to be from sources outside the United States. H and r block Tax home. H and r block   Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. H and r block Your tax home is the place where you permanently or indefinitely work as an employee or a self-employed individual. H and r block If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. H and r block If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. H and r block Inventory property. H and r block   Inventory property is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. H and r block Income from the sale of inventory that you purchased is sourced where the property is sold. H and r block Generally, this is where title to the property passes to the buyer. H and r block For example, income from the sale of inventory in the United States is U. H and r block S. H and r block source income, whether you purchased it in the United States or in a foreign country. H and r block   Income from the sale of inventory property that you produced in the United States and sold outside the United States (or vice versa) is partly from sources in the United States and partly from sources outside the United States. H and r block For information on making this allocation, see section 1. H and r block 863-3 of the regulations. H and r block   These rules apply even if your tax home is not in the United States. H and r block Depreciable property. H and r block   To determine the source of any gain from the sale of depreciable personal property, you must first figure the part of the gain that is not more than the total depreciation adjustments on the property. H and r block You allocate this part of the gain to sources in the United States based on the ratio of U. H and r block S. H and r block depreciation adjustments to total depreciation adjustments. H and r block The rest of this part of the gain is considered to be from sources outside the United States. H and r block   For this purpose, “U. H and r block S. H and r block depreciation adjustments” are the depreciation adjustments to the basis of the property that are allowable in figuring taxable income from U. H and r block S. H and r block sources. H and r block However, if the property is used predominantly in the United States during a tax year, all depreciation deductions allowable for that year are treated as U. H and r block S. H and r block depreciation adjustments. H and r block But there are some exceptions for certain transportation, communications, and other property used internationally. H and r block   Gain from the sale of depreciable property that is more than the total depreciation adjustments on the property is sourced as if the property were inventory property, as discussed above. H and r block   A loss is sourced in the same way as the depreciation deductions were sourced. H and r block However, if the property was used predominantly in the United States, the entire loss reduces U. H and r block S. H and r block source income. H and r block   The basis of property usually means the cost (money plus the fair market value of other property or services) of property you acquire. H and r block Depreciation is an amount deducted to recover the cost or other basis of a trade or business asset. H and r block The amount you can deduct depends on the property's cost, when you began using the property, how long it will take to recover your cost, and which depreciation method you use. H and r block A depreciation deduction is any deduction for depreciation or amortization or any other allowable deduction that treats a capital expenditure as a deductible expense. H and r block Intangible property. H and r block   Intangible property includes patents, copyrights, secret processes or formulas, goodwill, trademarks, trade names, or other like property. H and r block The gain from the sale of amortizable or depreciable intangible property, up to the previously allowable amortization or depreciation deductions, is sourced in the same way as the original deductions were sourced. H and r block This is the same as the source rule for gain from the sale of depreciable property. H and r block See Depreciable property , earlier, for details on how to apply this rule. H and r block   Gain in excess of the amortization or depreciation deductions is sourced in the country where the property is used if the income from the sale is contingent on the productivity, use, or disposition of that property. H and r block If the income is not contingent on the productivity, use, or disposition of the property, the income is sourced according to your tax home as discussed earlier. H and r block If payments for goodwill do not depend on its productivity, use, or disposition, their source is the country in which the goodwill was generated. H and r block Sales through offices or fixed places of business. H and r block   Despite any of the earlier rules, if you do not have a tax home in the United States, but you maintain an office or other fixed place of business in the United States, treat the income from any sale of personal property (including inventory property) that is attributable to that office or place of business as U. H and r block S. H and r block source income. H and r block However, this rule does not apply to sales of inventory property for use, disposition, or consumption outside the United States if your office or other fixed place of business outside the United States materially participated in the sale. H and r block   If you have a tax home in the United States but maintain an office or other fixed place of business outside the United States, income from sales of personal property, other than inventory, depreciable property, or intangibles, that is attributable to that foreign office or place of business may be treated as U. H and r block S. H and r block source income. H and r block The income is treated as U. H and r block S. H and r block source income if an income tax of less than 10% of the income from the sale is paid to a foreign country. H and r block This rule also applies to losses if the foreign country would have imposed an income tax of less than 10% had the sale resulted in a gain. H and r block Community Income If you are married and you or your spouse is subject to the community property laws of a foreign country, a U. H and r block S. H and r block state, or a U. H and r block S. H and r block possession, you generally must follow those laws to determine the income of yourself and your spouse for U. H and r block S. H and r block tax purposes. H and r block But you must disregard certain community property laws if: Both you and your spouse are nonresident aliens, or One of you is a nonresident alien and the other is a U. H and r block S. H and r block citizen or resident and you do not both choose to be treated as U. H and r block S. H and r block residents as explained in chapter 1. H and r block In these cases, you and your spouse must report community income as explained later. H and r block Earned income. H and r block   Earned income of a spouse, other than trade or business income and a partner's distributive share of partnership income, is treated as the income of the spouse whose services produced the income. H and r block That spouse must report all of it on his or her separate return. H and r block Trade or business income. H and r block   Trade or business income, other than a partner's distributive share of partnership income, is treated as the income of the spouse carrying on the trade or business. H and r block That spouse must report all of it on his or her separate return. H and r block Partnership income (or loss). H and r block   A partner's distributive share of partnership income (or loss) is treated as the income (or loss) of the partner. H and r block The partner must report all of it on his or her separate return. H and r block Separate property income. H and r block   Income derived from the separate property of one spouse (and which is not earned income, trade or business income, or partnership distributive share income) is treated as the income of that spouse. H and r block That spouse must report all of it on his or her separate return. H and r block Use the appropriate community property law to determine what is separate property. H and r block Other community income. H and r block   All other community income is treated as provided by the applicable community property laws. H and r block Prev  Up  Next   Home   More Online Publications
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H and r block 24. H and r block   Contributions Table of Contents Introduction Useful Items - You may want to see: Organizations That Qualify To Receive Deductible ContributionsTypes of Qualified Organizations Contributions You Can DeductContributions From Which You Benefit Expenses Paid for Student Living With You Out-of-Pocket Expenses in Giving Services Contributions You Cannot DeductContributions to Individuals Contributions to Nonqualified Organizations Contributions From Which You Benefit Value of Time or Services Personal Expenses Appraisal Fees Contributions of PropertyException. H and r block Household items. H and r block Deduction more than $500. H and r block Form 1098-C. H and r block Filing deadline approaching and still no Form 1098-C. H and r block Exception 1—vehicle used or improved by organization. H and r block Exception 2—vehicle given or sold to needy individual. H and r block Deduction $500 or less. H and r block Right to use property. H and r block Tangible personal property. H and r block Future interest. H and r block Determining Fair Market Value Giving Property That Has Decreased in Value Giving Property That Has Increased in Value When To DeductChecks. H and r block Text message. H and r block Credit card. H and r block Pay-by-phone account. H and r block Stock certificate. H and r block Promissory note. H and r block Option. H and r block Borrowed funds. H and r block Limits on DeductionsCarryovers Records To KeepCash Contributions Noncash Contributions Out-of-Pocket Expenses How To Report Introduction This chapter explains how to claim a deduction for your charitable contributions. H and r block It discusses the following topics. H and r block The types of organizations to which you can make deductible charitable contributions. H and r block The types of contributions you can deduct. H and r block How much you can deduct. H and r block What records you must keep. H and r block How to report your charitable contributions. H and r block A charitable contribution is a donation or gift to, or for the use of, a qualified organization. H and r block It is voluntary and is made without getting, or expecting to get, anything of equal value. H and r block Form 1040 required. H and r block    To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. H and r block The amount of your deduction may be limited if certain rules and limits explained in this chapter apply to you. H and r block The limits are explained in detail in Publication 526. H and r block Useful Items - You may want to see: Publication 526 Charitable Contributions 561 Determining the Value of Donated Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 8283 Noncash Charitable Contributions Organizations That Qualify To Receive Deductible Contributions You can deduct your contributions only if you make them to a qualified organization. H and r block Most organizations other than churches and governments must apply to the IRS to become a qualified organization. H and r block How to check whether an organization can receive deductible charitable contributions. H and r block   You can ask any organization whether it is a qualified organization, and most will be able to tell you. H and r block Or go to IRS. H and r block gov. H and r block Click on “Tools” and then on “Exempt Organizations Select Check” (www. H and r block irs. H and r block gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check). H and r block This online tool will enable you to search for qualified organizations. H and r block You can also call the IRS to find out if an organization is qualified. H and r block Call 1-877-829-5500. H and r block People who are deaf, hard of hearing, or have a speech disability and who have access to TTY/TDD equipment can call 1-800-829-4059. H and r block Deaf or hard of hearing individuals can also contact the IRS through relay services such as the Federal Relay Service at www. H and r block gsa. H and r block gov/fedrelay. H and r block Types of Qualified Organizations Generally, only the following types of organizations can be qualified organizations. H and r block A community chest, corporation, trust, fund, or foundation organized or created in or under the laws of the United States, any state, the District of Columbia, or any possession of the United States (including Puerto Rico). H and r block It must, however, be organized and operated only for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. H and r block Certain organizations that foster national or international amateur sports competition also qualify. H and r block War veterans' organizations, including posts, auxiliaries, trusts, or foundations, organized in the United States or any of its possessions (including Puerto Rico). H and r block Domestic fraternal societies, orders, and associations operating under the lodge system. H and r block (Your contribution to this type of organization is deductible only if it is to be used solely for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. H and r block ) Certain nonprofit cemetery companies or corporations. H and r block (Your contribution to this type of organization is not deductible if it can be used for the care of a specific lot or mausoleum crypt. H and r block ) The United States or any state, the District of Columbia, a U. H and r block S. H and r block possession (including Puerto Rico), a political subdivision of a state or U. H and r block S. H and r block possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions. H and r block (Your contribution to this type of organization is only deductible if it is to be used solely for public purposes. H and r block ) Examples. H and r block    The following list gives some examples of qualified organizations. H and r block Churches, a convention or association of churches, temples, synagogues, mosques, and other religious organizations. H and r block Most nonprofit charitable organizations such as the American Red Cross and the United Way. H and r block Most nonprofit educational organizations, including the Boy Scouts of America, Girl Scouts of America, colleges, and museums. H and r block This also includes nonprofit daycare centers that provide childcare to the general public if substantially all the childcare is provided to enable parents and guardians to be gainfully employed. H and r block However, if your contribution is a substitute for tuition or other enrollment fee, it is not deductible as a charitable contribution, as explained later under Contributions You Cannot Deduct . H and r block Nonprofit hospitals and medical research organizations. H and r block Utility company emergency energy programs, if the utility company is an agent for a charitable organization that assists individuals with emergency energy needs. H and r block Nonprofit volunteer fire companies. H and r block Nonprofit organizations that develop and maintain public parks and recreation facilities. H and r block Civil defense organizations. H and r block Certain foreign charitable organizations. H and r block   Under income tax treaties with Canada, Israel, and Mexico, you may be able to deduct contributions to certain Canadian, Israeli, or Mexican charitable organizations. H and r block Generally, you must have income from sources in that country. H and r block For additional information on the deduction of contributions to Canadian charities, see Publication 597, Information on the United States–Canada Income Tax Treaty. H and r block If you need more information on how to figure your contribution to Mexican and Israeli charities, see Publication 526. H and r block Contributions You Can Deduct Generally, you can deduct contributions of money or property you make to, or for the use of, a qualified organization. H and r block A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. H and r block The contributions must be made to a qualified organization and not set aside for use by a specific person. H and r block If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. H and r block See Contributions of Property , later in this chapter. H and r block Your deduction for charitable contributions generally cannot be more than 50% of your adjusted gross income (AGI), but in some cases 20% and 30% limits may apply. H and r block See Limits on Deductions , later. H and r block In addition, the total of your charitable contribution deduction and certain other itemized deductions may be limited. H and r block See chapter 29. H and r block Table 24-1 gives examples of contributions you can and cannot deduct. H and r block Contributions From Which You Benefit If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. H and r block Also see Contributions From Which You Benefit under Contributions You Cannot Deduct, later. H and r block If you pay more than fair market value to a qualified organization for goods or services, the excess may be a charitable contribution. H and r block For the excess amount to qualify, you must pay it with the intent to make a charitable contribution. H and r block Example 1. H and r block You pay $65 for a ticket to a dinner-dance at a church. H and r block Your entire $65 payment goes to the church. H and r block The ticket to the dinner-dance has a fair market value of $25. H and r block When you buy your ticket, you know that its value is less than your payment. H and r block To figure the amount of your charitable contribution, subtract the value of the benefit you receive ($25) from your total payment ($65). H and r block You can deduct $40 as a contribution to the church. H and r block Example 2. H and r block At a fundraising auction conducted by a charity, you pay $600 for a week's stay at a beach house. H and r block The amount you pay is no more than the fair rental value. H and r block You have not made a deductible charitable contribution. H and r block Athletic events. H and r block   If you make a payment to, or for the benefit of, a college or university and, as a result, you receive the right to buy tickets to an athletic event in the athletic stadium of the college or university, you can deduct 80% of the payment as a charitable contribution. H and r block   If any part of your payment is for tickets (rather than the right to buy tickets), that part is not deductible. H and r block Subtract the price of the tickets from your payment. H and r block You can deduct 80% of the remaining amount as a charitable contribution. H and r block Example 1. H and r block You pay $300 a year for membership in a university's athletic scholarship program. H and r block The only benefit of membership is that you have the right to buy one season ticket for a seat in a designated area of the stadium at the university's home football games. H and r block You can deduct $240 (80% of $300) as a charitable contribution. H and r block Table 24-1. H and r block Examples of Charitable Contributions—A Quick Check Use the following lists for a quick check of whether you can deduct a contribution. H and r block See the rest of this chapter for more information and additional rules and limits that may apply. H and r block Deductible As  Charitable Contributions Not Deductible  As Charitable Contributions Money or property you give to:  Churches, synagogues, temples, mosques, and other religious organizations Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park) Nonprofit schools and hospitals The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America, etc. H and r block War veterans groups   Expenses paid for a student living with you, sponsored by a qualified organization  Out-of-pocket expenses when you serve a qualified organization as a volunteer Money or property you give to:  Civic leagues, social and sports clubs, labor unions, and chambers of commerce Foreign organizations (except certain Canadian, Israeli, and Mexican charities) Groups that are run for personal profit Groups whose purpose is to lobby for law changes Homeowners' associations Individuals Political groups or candidates for public office   Cost of raffle, bingo, or lottery tickets  Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups  Tuition  Value of your time or services  Value of blood given to a blood bank    Example 2. H and r block The facts are the same as in Example 1 except your $300 payment includes the purchase of one season ticket for the stated ticket price of $120. H and r block You must subtract the usual price of a ticket ($120) from your $300 payment. H and r block The result is $180. H and r block Your deductible charitable contribution is $144 (80% of $180). H and r block Charity benefit events. H and r block   If you pay a qualified organization more than fair market value for the right to attend a charity ball, banquet, show, sporting event, or other benefit event, you can deduct only the amount that is more than the value of the privileges or other benefits you receive. H and r block   If there is an established charge for the event, that charge is the value of your benefit. H and r block If there is no established charge, the reasonable value of the right to attend the event is the value of your benefit. H and r block Whether you use the tickets or other privileges has no effect on the amount you can deduct. H and r block However, if you return the ticket to the qualified organization for resale, you can deduct the entire amount you paid for the ticket. H and r block    Even if the ticket or other evidence of payment indicates that the payment is a “contribution,” this does not mean you can deduct the entire amount. H and r block If the ticket shows the price of admission and the amount of the contribution, you can deduct the contribution amount. H and r block Example. H and r block You pay $40 to see a special showing of a movie for the benefit of a qualified organization. H and r block Printed on the ticket is “Contribution—$40. H and r block ” If the regular price for the movie is $8, your contribution is $32 ($40 payment − $8 regular price). H and r block Membership fees or dues. H and r block    You may be able to deduct membership fees or dues you pay to a qualified organization. H and r block However, you can deduct only the amount that is more than the value of the benefits you receive. H and r block    You cannot deduct dues, fees, or assessments paid to country clubs and other social organizations. H and r block They are not qualified organizations. H and r block Certain membership benefits can be disregarded. H and r block   Both you and the organization can disregard the following membership benefits if you receive them in return for an annual payment of $75 or less. H and r block Any rights or privileges, other than those discussed under Athletic events , earlier, that you can use frequently while you are a member, such as: Free or discounted admission to the organization's facilities or events, Free or discounted parking, Preferred access to goods or services, and Discounts on the purchase of goods and services. H and r block Admission, while you are a member, to events open only to members of the organization, if the organization reasonably projects that the cost per person (excluding any allocated overhead) is not more than $10. H and r block 20. H and r block Token items. H and r block   You do not have to reduce your contribution by the value of any benefit you receive if both of the following are true. H and r block You receive only a small item or other benefit of token value. H and r block The qualified organization correctly determines that the value of the item or benefit you received is not substantial and informs you that you can deduct your payment in full. H and r block Written statement. H and r block   A qualified organization must give you a written statement if you make a payment of more than $75 that is partly a contribution and partly for goods or services. H and r block The statement must say that you can deduct only the amount of your payment that is more than the value of the goods or services you received. H and r block It must also give you a good faith estimate of the value of those goods or services. H and r block   The organization can give you the statement either when it solicits or when it receives the payment from you. H and r block Exception. H and r block   An organization will not have to give you this statement if one of the following is true. H and r block The organization is: A governmental organization described in (5) under Types of Qualified Organizations , earlier, or An organization formed only for religious purposes, and the only benefit you receive is an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in commercial transactions outside the donative context. H and r block You receive only items whose value is not substantial as described under Token items , earlier. H and r block You receive only membership benefits that can be disregarded, as described earlier. H and r block Expenses Paid for Student Living With You You may be able to deduct some expenses of having a student live with you. H and r block You can deduct qualifying expenses for a foreign or American student who: Lives in your home under a written agreement between you and a qualified organization as part of a program of the organization to provide educational opportunities for the student, Is not your relative or dependent, and Is a full-time student in the twelfth or any lower grade at a school in the United States. H and r block You can deduct up to $50 a month for each full calendar month the student lives with you. H and r block Any month when conditions (1) through (3) are met for 15 days or more counts as a full month. H and r block For additional information, see Expenses Paid for Student Living With You in Publication 526. H and r block Mutual exchange program. H and r block   You cannot deduct the costs of a foreign student living in your home under a mutual exchange program through which your child will live with a family in a foreign country. H and r block Table 24-2. H and r block Volunteers' Questions and Answers If you volunteer for a qualified organization, the following questions and answers may apply to you. H and r block All of the rules explained in this chapter also apply. H and r block See, in particular, Out-of-Pocket Expenses in Giving Services . H and r block Question Answer I volunteer 6 hours a week in the office of a qualified organization. H and r block The receptionist is paid $10 an hour for the same work. H and r block Can I deduct $60 a week for my time?    No, you cannot deduct the value of your time or services. H and r block The office is 30 miles from my home. H and r block Can I deduct any of my car expenses for these trips? Yes, you can deduct the costs of gas and oil that are directly related to getting to and from the place where you volunteer. H and r block If you don't want to figure your actual costs, you can deduct 14 cents for each mile. H and r block I volunteer as a Red Cross nurse's aide at a hospital. H and r block Can I deduct the cost of the uniforms I must wear? Yes, you can deduct the cost of buying and cleaning your uniforms if the hospital is a qualified organization, the uniforms are not suitable for everyday use, and you must wear them when volunteering. H and r block I pay a babysitter to watch my children while I volunteer for a qualified organization. H and r block Can I deduct these costs? No, you cannot deduct payments for childcare expenses as a charitable contribution, even if you would be unable to volunteer without childcare. H and r block (If you have childcare expenses so you can work for pay, see chapter 32. H and r block ) Out-of-Pocket Expenses in Giving Services Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. H and r block The amounts must be: Unreimbursed, Directly connected with the services, Expenses you had only because of the services you gave, and Not personal, living, or family expenses. H and r block Table 24-2 contains questions and answers that apply to some individuals who volunteer their services. H and r block Conventions. H and r block   If a qualified organization selects you to attend a convention as its representative, you can deduct unreimbursed expenses for travel, including reasonable amounts for meals and lodging, while away from home overnight in connection with the convention. H and r block However, see Travel , later. H and r block   You cannot deduct personal expenses for sightseeing, fishing parties, theater tickets, or nightclubs. H and r block You also cannot deduct transportation, meals and lodging, and other expenses for your spouse or children. H and r block    You cannot deduct your travel expenses in attending a church convention if you go only as a member of your church rather than as a chosen representative. H and r block You can, however, deduct unreimbursed expenses that are directly connected with giving services for your church during the convention. H and r block Uniforms. H and r block   You can deduct the cost and upkeep of uniforms that are not suitable for everyday use and that you must wear while performing donated services for a charitable organization. H and r block Foster parents. H and r block   You may be able to deduct as a charitable contribution some of the costs of being a foster parent (foster care provider) if you have no profit motive in providing the foster care and are not, in fact, making a profit. H and r block A qualified organization must select the individuals you take into your home for foster care. H and r block    You can deduct expenses that meet both of the following requirements. H and r block They are unreimbursed out-of-pocket expenses to feed, clothe, and care for the foster child. H and r block They are incurred primarily to benefit the qualified organization. H and r block   Unreimbursed expenses that you cannot deduct as charitable contributions may be considered support provided by you in determining whether you can claim the foster child as a dependent. H and r block For details, see chapter 3. H and r block Example. H and r block You cared for a foster child because you wanted to adopt her, not to benefit the agency that placed her in your home. H and r block Your unreimbursed expenses are not deductible as charitable contributions. H and r block Car expenses. H and r block   You can deduct as a charitable contribution any unreimbursed out-of-pocket expenses, such as the cost of gas and oil, that are directly related to the use of your car in giving services to a charitable organization. H and r block You cannot deduct general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance. H and r block    If you do not want to deduct your actual expenses, you can use a standard mileage rate of 14 cents a mile to figure your contribution. H and r block   You can deduct parking fees and tolls whether you use your actual expenses or the standard mileage rate. H and r block   You must keep reliable written records of your car expenses. H and r block For more information, see Car expenses under Records To Keep, later. H and r block Travel. H and r block   Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. H and r block This applies whether you pay the expenses directly or indirectly. H and r block You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses. H and r block   The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. H and r block Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. H and r block However, if you have only nominal duties, or if for significant parts of the trip you do not have any duties, you cannot deduct your travel expenses. H and r block Example 1. H and r block You are a troop leader for a tax-exempt youth group and you take the group on a camping trip. H and r block You are responsible for overseeing the setup of the camp and for providing adult supervision for other activities during the entire trip. H and r block You participate in the activities of the group and enjoy your time with them. H and r block You oversee the breaking of camp and you transport the group home. H and r block You can deduct your travel expenses. H and r block Example 2. H and r block You sail from one island to another and spend 8 hours a day counting whales and other forms of marine life. H and r block The project is sponsored by a charitable organization. H and r block In most circumstances, you cannot deduct your expenses. H and r block Example 3. H and r block You work for several hours each morning on an archaeological dig sponsored by a charitable organization. H and r block The rest of the day is free for recreation and sightseeing. H and r block You cannot take a charitable contribution deduction even though you work very hard during those few hours. H and r block Example 4. H and r block You spend the entire day attending a charitable organization's regional meeting as a chosen representative. H and r block In the evening you go to the theater. H and r block You can claim your travel expenses as charitable contributions, but you cannot claim the cost of your evening at the theater. H and r block Daily allowance (per diem). H and r block   If you provide services for a charitable organization and receive a daily allowance to cover reasonable travel expenses, including meals and lodging while away from home overnight, you must include in income any part of the allowance that is more than your deductible travel expenses. H and r block You may be able to deduct any necessary travel expenses that are more than the allowance. H and r block Deductible travel expenses. H and r block   These include: Air, rail, and bus transportation, Out-of-pocket expenses for your car, Taxi fares or other costs of transportation between the airport or station and your hotel, Lodging costs, and The cost of meals. H and r block Because these travel expenses are not business-related, they are not subject to the same limits as business-related expenses. H and r block For information on business travel expenses, see Travel Expenses in chapter 26. H and r block Contributions You Cannot Deduct There are some contributions you cannot deduct, such as those made to specific individuals and those made to nonqualified organizations. H and r block (See Contributions to Individuals and Contributions to Nonqualified Organizations , next. H and r block ) There are others you can deduct only part of, as discussed later under Contributions From Which You Benefit . H and r block Contributions to Individuals You cannot deduct contributions to specific individuals, including the following. H and r block Contributions to fraternal societies made for the purpose of paying medical or burial expenses of deceased members. H and r block Contributions to individuals who are needy or worthy. H and r block You cannot deduct these contributions even if you make them to a qualified organization for the benefit of a specific person. H and r block But you can deduct a contribution to a qualified organization that helps needy or worthy individuals if you do not indicate that your contribution is for a specific person. H and r block Example. H and r block You can deduct contributions to a qualified organization for flood relief, hurricane relief, or other disaster relief. H and r block However, you cannot deduct contributions earmarked for relief of a particular individual or family. H and r block Payments to a member of the clergy that can be spent as he or she wishes, such as for personal expenses. H and r block Expenses you paid for another person who provided services to a qualified organization. H and r block Example. H and r block Your son does missionary work. H and r block You pay his expenses. H and r block You cannot claim a deduction for your son's unreimbursed expenses related to his contribution of services. H and r block Payments to a hospital that are for a specific patient's care or for services for a specific patient. H and r block You cannot deduct these payments even if the hospital is operated by a city, a state, or other qualified organization. H and r block Contributions to Nonqualified Organizations You cannot deduct contributions to organizations that are not qualified to receive tax-deductible contributions, including the following. H and r block Certain state bar associations if: The bar is not a political subdivision of a state, The bar has private, as well as public, purposes, such as promoting the professional interests of members, and Your contribution is unrestricted and can be used for private purposes. H and r block Chambers of commerce and other business leagues or organizations (but see chapter 28). H and r block Civic leagues and associations. H and r block Communist organizations. H and r block Country clubs and other social clubs. H and r block Most foreign organizations (other than certain Canadian, Israeli, or Mexican charitable organizations). H and r block For details, see Publication 526. H and r block Homeowners' associations. H and r block Labor unions (but see chapter 28). H and r block Political organizations and candidates. H and r block Contributions From Which You Benefit If you receive or expect to receive a financial or economic benefit as a result of making a contribution to a qualified organization, you cannot deduct the part of the contribution that represents the value of the benefit you receive. H and r block See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. H and r block These contributions include the following. H and r block Contributions for lobbying. H and r block This includes amounts that you earmark for use in, or in connection with, influencing specific legislation. H and r block Contributions to a retirement home for room, board, maintenance, or admittance. H and r block Also, if the amount of your contribution depends on the type or size of apartment you will occupy, it is not a charitable contribution. H and r block Costs of raffles, bingo, lottery, etc. H and r block You cannot deduct as a charitable contribution amounts you pay to buy raffle or lottery tickets or to play bingo or other games of chance. H and r block For information on how to report gambling winnings and losses, see Gambling winnings in chapter 12 and Gambling Losses Up to the Amount of Gambling Winnings in chapter 28. H and r block Dues to fraternal orders and similar groups. H and r block However, see Membership fees or dues , earlier, under Contributions You Can Deduct. H and r block Tuition, or amounts you pay instead of tuition. H and r block You cannot deduct as a charitable contribution amounts you pay as tuition even if you pay them for children to attend parochial schools or qualifying nonprofit daycare centers. H and r block You also cannot deduct any fixed amount you must pay in addition to, or instead of, tuition to enroll in a private school, even if it is designated as a “donation. H and r block ” Value of Time or Services You cannot deduct the value of your time or services, including: Blood donations to the American Red Cross or to blood banks, and The value of income lost while you work as an unpaid volunteer for a qualified organization. H and r block Personal Expenses You cannot deduct personal, living, or family expenses, such as the following items. H and r block The cost of meals you eat while you perform services for a qualified organization unless it is necessary for you to be away from home overnight while performing the services. H and r block Adoption expenses, including fees paid to an adoption agency and the costs of keeping a child in your home before adoption is final (but see Adoption Credit in chapter 37, and the instructions for Form 8839, Qualified Adoption Expenses). H and r block You also may be able to claim an exemption for the child. H and r block See Adopted child in chapter 3. H and r block Appraisal Fees You cannot deduct as a charitable contribution any fees you pay to find the fair market value of donated property (but see chapter 28). H and r block Contributions of Property If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. H and r block However, if the property has increased in value, you may have to make some adjustments to the amount of your deduction. H and r block See Giving Property That Has Increased in Value , later. H and r block For information about the records you must keep and the information you must furnish with your return if you donate property, see Records To Keep and How To Report , later. H and r block Clothing and household items. H and r block   You cannot take a deduction for clothing or household items you donate unless the clothing or household items are in good used condition or better. H and r block Exception. H and r block   You can take a deduction for a contribution of an item of clothing or household item that is not in good used condition or better if you deduct more than $500 for it and include a qualified appraisal of it with your return. H and r block Household items. H and r block   Household items include: Furniture and furnishings, Electronics, Appliances, Linens, and Other similar items. H and r block   Household items do not include: Food, Paintings, antiques, and other objects of art, Jewelry and gems, and Collections. H and r block Cars, boats, and airplanes. H and r block    The following rules apply to any donation of a qualified vehicle. H and r block A qualified vehicle is: A car or any motor vehicle manufactured mainly for use on public streets, roads, and highways, A boat, or An airplane. H and r block Deduction more than $500. H and r block   If you donate a qualified vehicle with a claimed fair market value of more than $500, you can deduct the smaller of: The gross proceeds from the sale of the vehicle by the organization, or The vehicle's fair market value on the date of the contribution. H and r block If the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to figure the deductible amount, as described under Giving Property That Has Increased in Value , later. H and r block Form 1098-C. H and r block   You must attach to your return Copy B of the Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, (or other statement containing the same information as Form 1098-C) you received from the organization. H and r block The Form 1098-C (or other statement) will show the gross proceeds from the sale of the vehicle. H and r block   If you e-file your return, you must: Attach Copy B of Form 1098-C to Form 8453 and mail the forms to the IRS, or Include Copy B of Form 1098-C as a pdf attachment if your software program allows it. H and r block   If you do not attach Form 1098-C (or other statement), you cannot deduct your contribution. H and r block    You must get Form 1098-C (or other statement) within 30 days of the sale of the vehicle. H and r block But if exception 1 or 2 (described later) applies, you must get Form 1098-C (or other statement) within 30 days of your donation. H and r block Filing deadline approaching and still no Form 1098-C. H and r block   If the filing deadline is approaching and you still do not have a Form 1098-C, you have two choices. H and r block Request an automatic 6-month extension of time to file your return. H and r block You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. H and r block S. H and r block Individual Income Tax Return. H and r block  For more information, see Automatic Extension in chapter 1. H and r block File the return on time without claiming the deduction for the qualified vehicle. H and r block After receiving the Form 1098-C, file an amended return, Form 1040X, claiming the deduction. H and r block Attach Copy B of Form 1098-C (or other statement) to the amended return. H and r block For more information about amended returns, see Amended Returns and Claims for Refund in chapter 1. H and r block Exceptions. H and r block   There are two exceptions to the rules just described for deductions of more than $500. H and r block Exception 1—vehicle used or improved by organization. H and r block   If the qualified organization makes a significant intervening use of or material improvement to the vehicle before transferring it, you generally can deduct the vehicle's fair market value at the time of the contribution. H and r block But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. H and r block The Form 1098-C (or other statement) will show whether this exception applies. H and r block Exception 2—vehicle given or sold to needy individual. H and r block   If the qualified organization will give the vehicle, or sell it for a price well below fair market value, to a needy individual to further the organization's charitable purpose, you generally can deduct the vehicle's fair market value at the time of the contribution. H and r block But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. H and r block The Form 1098-C (or other statement) will show whether this exception applies. H and r block   This exception does not apply if the organization sells the vehicle at auction. H and r block In that case, you cannot deduct the vehicle's fair market value. H and r block Example. H and r block Anita donates a used car to a qualified organization. H and r block She bought it 3 years ago for $9,000. H and r block A used car guide shows the fair market value for this type of car is $6,000. H and r block However, Anita gets a Form 1098-C from the organization showing the car was sold for $2,900. H and r block Neither exception 1 nor exception 2 applies. H and r block If Anita itemizes her deductions, she can deduct $2,900 for her donation. H and r block She must attach Form 1098-C and Form 8283 to her return. H and r block Deduction $500 or less. H and r block   If the qualified organization sells the vehicle for $500 or less and exceptions 1 and 2 do not apply, you can deduct the smaller of: $500, or The vehicle's fair market value on the date of the contribution. H and r block But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. H and r block   If the vehicle's fair market value is at least $250 but not more than $500, you must have a written statement from the qualified organization acknowledging your donation. H and r block The statement must contain the information and meet the tests for an acknowledgment described under Deductions of At Least $250 But Not More Than $500 under Records To Keep, later. H and r block Partial interest in property. H and r block   Generally, you cannot deduct a charitable contribution of less than your entire interest in property. H and r block Right to use property. H and r block   A contribution of the right to use property is a contribution of less than your entire interest in that property and is not deductible. H and r block For exceptions and more information, see Partial Interest in Property Not in Trust in Publication 561. H and r block Future interests in tangible personal property. H and r block   You cannot deduct the value of a charitable contribution of a future interest in tangible personal property until all intervening interests in and rights to the actual possession or enjoyment of the property have either expired or been turned over to someone other than yourself, a related person, or a related organization. H and r block Tangible personal property. H and r block   This is any property, other than land or buildings, that can be seen or touched. H and r block It includes furniture, books, jewelry, paintings, and cars. H and r block Future interest. H and r block   This is any interest that is to begin at some future time, regardless of whether it is designated as a future interest under state law. H and r block Determining Fair Market Value This section discusses general guidelines for determining the fair market value of various types of donated property. H and r block Publication 561 contains a more complete discussion. H and r block Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. H and r block Used clothing and household items. H and r block   The fair market value of used clothing and household goods is usually far less than what you paid for them when they were new. H and r block   For used clothing, you should claim as the value the price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops. H and r block See Household Goods in Publication 561 for information on the valuation of household goods, such as furniture, appliances, and linens. H and r block Example. H and r block Dawn Greene donated a coat to a thrift store operated by her church. H and r block She paid $300 for the coat 3 years ago. H and r block Similar coats in the thrift store sell for $50. H and r block The fair market value of the coat is $50. H and r block Dawn's donation is limited to $50. H and r block Cars, boats, and airplanes. H and r block   If you contribute a car, boat, or airplane to a charitable organization, you must determine its fair market value. H and r block Certain commercial firms and trade organizations publish used car pricing guides, commonly called “blue books,” containing complete dealer sale prices or dealer average prices for recent model years. H and r block The guides may be published monthly or seasonally and for different regions of the country. H and r block These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. H and r block The prices are not “official” and these publications are not considered an appraisal of any specific donated property. H and r block But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. H and r block   You can also find used car pricing information on the Internet. H and r block Example. H and r block You donate a used car in poor condition to a local high school for use by students studying car repair. H and r block A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. H and r block However, the guide shows the price for a private party sale of the car is only $750. H and r block The fair market value of the car is considered to be $750. H and r block Large quantities. H and r block   If you contribute a large number of the same item, fair market value is the price at which comparable numbers of the item are being sold. H and r block Giving Property That Has Decreased in Value If you contribute property with a fair market value that is less than your basis in it, your deduction is limited to its fair market value. H and r block You cannot claim a deduction for the difference between the property's basis and its fair market value. H and r block Giving Property That Has Increased in Value If you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction. H and r block Your basis in property is generally what you paid for it. H and r block See chapter 13 if you need more information about basis. H and r block Different rules apply to figuring your deduction, depending on whether the property is: Ordinary income property, or Capital gain property. H and r block Ordinary income property. H and r block   Property is ordinary income property if you would have recognized ordinary income or short-term capital gain had you sold it at fair market value on the date it was contributed. H and r block Examples of ordinary income property are inventory, works of art created by the donor, manuscripts prepared by the donor, and capital assets (defined in chapter 14) held 1 year or less. H and r block Amount of deduction. H and r block   The amount you can deduct for a contribution of ordinary income property is its fair market value minus the amount that would be ordinary income or short-term capital gain if you sold the property for its fair market value. H and r block Generally, this rule limits the deduction to your basis in the property. H and r block Example. H and r block You donate stock you held for 5 months to your church. H and r block The fair market value of the stock on the day you donate it is $1,000, but you paid only $800 (your basis). H and r block Because the $200 of appreciation would be short-term capital gain if you sold the stock, your deduction is limited to $800 (fair market value minus the appreciation). H and r block Capital gain property. H and r block   Property is capital gain property if you would have recognized long-term capital gain had you sold it at fair market value on the date of the contribution. H and r block It includes capital assets held more than 1 year, as well as certain real property and depreciable property used in your trade or business and, generally, held more than 1 year. H and r block Amount of deduction — general rule. H and r block   When figuring your deduction for a contribution of capital gain property, you generally can use the fair market value of the property. H and r block Exceptions. H and r block   In certain situations, you must reduce the fair market value by any amount that would have been long-term capital gain if you had sold the property for its fair market value. H and r block Generally, this means reducing the fair market value to the property's cost or other basis. H and r block Bargain sales. H and r block   A bargain sale of property is a sale or exchange for less than the property's fair market value. H and r block A bargain sale to a qualified organization is partly a charitable contribution and partly a sale or exchange. H and r block A bargain sale may result in a taxable gain. H and r block More information. H and r block   For more information on donating appreciated property, see Giving Property That Has Increased in Value in Publication 526. H and r block When To Deduct You can deduct your contributions only in the year you actually make them in cash or other property (or in a later carryover year, as explained later under Carryovers ). H and r block This applies whether you use the cash or an accrual method of accounting. H and r block Time of making contribution. H and r block   Usually, you make a contribution at the time of its unconditional delivery. H and r block Checks. H and r block   A check you mail to a charity is considered delivered on the date you mail it. H and r block Text message. H and r block   Contributions made by text message are deductible in the year you send the text message if the contribution is charged to your telephone or wireless account. H and r block Credit card. H and r block    Contributions charged on your credit card are deductible in the year you make the charge. H and r block Pay-by-phone account. H and r block    Contributions made through a pay-by-phone account are considered delivered on the date the financial institution pays the amount. H and r block Stock certificate. H and r block   A properly endorsed stock certificate is considered delivered on the date of mailing or other delivery to the charity or to the charity's agent. H and r block However, if you give a stock certificate to your agent or to the issuing corporation for transfer to the name of the charity, your contribution is not delivered until the date the stock is transferred on the books of the corporation. H and r block Promissory note. H and r block   If you issue and deliver a promissory note to a charity as a contribution, it is not a contribution until you make the note payments. H and r block Option. H and r block    If you grant a charity an option to buy real property at a bargain price, it is not a contribution until the organization exercises the option. H and r block Borrowed funds. H and r block   If you contribute borrowed funds, you can deduct the contribution in the year you deliver the funds to the charity, regardless of when you repay the loan. H and r block Limits on Deductions The amount you can deduct for charitable contributions cannot be more than 50% of your adjusted gross income (AGI). H and r block Your deduction may be further limited to 30% or 20% of your AGI, depending on the type of property you give and the type of organization you give it to. H and r block If your total contributions for the year are 20% or less of your AGI, these limits do not apply to you. H and r block The limits are discussed in detail under Limits on Deductions in Publication 526. H and r block A higher limit applies to certain qualified conservation contributions. H and r block See Publication 526 for details. H and r block Carryovers You can carry over any contributions you cannot deduct in the current year because they exceed your adjusted-gross-income limits. H and r block You can deduct the excess in each of the next 5 years until it is used up, but not beyond that time. H and r block For more information, see Carryovers in Publication 526. H and r block Records To Keep You must keep records to prove the amount of the contributions you make during the year. H and r block The kind of records you must keep depends on the amount of your contributions and whether they are: Cash contributions, Noncash contributions, or Out-of-pocket expenses when donating your services. H and r block Note. H and r block An organization generally must give you a written statement if it receives a payment from you that is more than $75 and is partly a contribution and partly for goods or services. H and r block (See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. H and r block ) Keep the statement for your records. H and r block It may satisfy all or part of the recordkeeping requirements explained in the following discussions. H and r block Cash Contributions Cash contributions include those paid by cash, check, electronic funds transfer, debit card, credit card, or payroll deduction. H and r block You cannot deduct a cash contribution, regardless of the amount, unless you keep one of the following. H and r block A bank record that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution. H and r block Bank records may include: A canceled check, A bank or credit union statement, or A credit card statement. H and r block A receipt (or a letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution. H and r block The payroll deduction records described next. H and r block Payroll deductions. H and r block   If you make a contribution by payroll deduction, you must keep: A pay stub, Form W-2, or other document furnished by your employer that shows the date and amount of the contribution, and A pledge card or other document prepared by or for the qualified organization that shows the name of the organization. H and r block If your employer withheld $250 or more from a single paycheck, see Contributions of $250 or More , next. H and r block Contributions of $250 or More You can claim a deduction for a contribution of $250 or more only if you have an acknowledgment of your contribution from the qualified organization or certain payroll deduction records. H and r block If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that lists each contribution and the date of each contribution and shows your total contributions. H and r block Amount of contribution. H and r block   In figuring whether your contribution is $250 or more, do not combine separate contributions. H and r block For example, if you gave your church $25 each week, your weekly payments do not have to be combined. H and r block Each payment is a separate contribution. H and r block   If contributions are made by payroll deduction, the deduction from each paycheck is treated as a separate contribution. H and r block   If you made a payment that is partly for goods and services, as described earlier under Contributions From Which You Benefit , your contribution is the amount of the payment that is more than the value of the goods and services. H and r block Acknowledgment. H and r block   The acknowledgment must meet these tests. H and r block It must be written. H and r block It must include: The amount of cash you contributed, Whether the qualified organization gave you any goods or services as a result of your contribution (other than certain token items and membership benefits), A description and good faith estimate of the value of any goods or services described in (b) (other than intangible religious benefits), and A statement that the only benefit you received was an intangible religious benefit, if that was the case. H and r block The acknowledgment does not need to describe or estimate the value of an intangible religious benefit. H and r block An intangible religious benefit is a benefit that generally is not sold in commercial transactions outside a donative (gift) context. H and r block An example is admission to a religious ceremony. H and r block You must get it on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. H and r block   If the acknowledgment does not show the date of the contribution, you must also have a bank record or receipt, as described earlier, that does show the date of the contribution. H and r block If the acknowledgment shows the date of the contribution and meets the other tests just described, you do not need any other records. H and r block Payroll deductions. H and r block   If you make a contribution by payroll deduction and your employer withholds $250 or more from a single paycheck, you must keep: A pay stub, Form W-2, or other document furnished by your employer that shows the amount withheld as a contribution, and A pledge card or other document prepared by or for the qualified organization that shows the name of the organization and states the organization does not provide goods or services in return for any contribution made to it by payroll deduction. H and r block A single pledge card may be kept for all contributions made by payroll deduction regardless of amount as long as it contains all the required information. H and r block   If the pay stub, Form W-2, pledge card, or other document does not show the date of the contribution, you must have another document that does show the date of the contribution. H and r block If the pay stub, Form W-2, pledge card, or other document shows the date of the contribution, you do not need any other records except those just described in (1) and (2). H and r block Noncash Contributions For a contribution not made in cash, the records you must keep depend on whether your deduction for the contribution is: Less than $250, At least $250 but not more than $500, Over $500 but not more than $5,000, or Over $5,000. H and r block Amount of deduction. H and r block   In figuring whether your deduction is $500 or more, combine your claimed deductions for all similar items of property donated to any charitable organization during the year. H and r block   If you received goods or services in return, as described earlier in Contributions From Which You Benefit , reduce your contribution by the value of those goods or services. H and r block If you figure your deduction by reducing the fair market value of the donated property by its appreciation, as described earlier in Giving Property That Has Increased in Value , your contribution is the reduced amount. H and r block Deductions of Less Than $250 If you make any noncash contribution, you must get and keep a receipt from the charitable organization showing: The name of the charitable organization, The date and location of the charitable contribution, and A reasonably detailed description of the property. H and r block A letter or other written communication from the charitable organization acknowledging receipt of the contribution and containing the information in (1), (2), and (3) will serve as a receipt. H and r block You are not required to have a receipt where it is impractical to get one (for example, if you leave property at a charity's unattended drop site). H and r block Additional records. H and r block   You must also keep reliable written records for each item of contributed property. H and r block Your written records must include the following information. H and r block The name and address of the organization to which you contributed. H and r block The date and location of the contribution. H and r block A description of the property in detail reasonable under the circumstances. H and r block For a security, keep the name of the issuer, the type of security, and whether it is regularly traded on a stock exchange or in an over-the-counter market. H and r block The fair market value of the property at the time of the contribution and how you figured the fair market value. H and r block If it was determined by appraisal, keep a signed copy of the appraisal. H and r block The cost or other basis of the property, if you must reduce its fair market value by appreciation. H and r block Your records should also include the amount of the reduction and how you figured it. H and r block The amount you claim as a deduction for the tax year as a result of the contribution, if you contribute less than your entire interest in the property during the tax year. H and r block Your records must include the amount you claimed as a deduction in any earlier years for contributions of other interests in this property. H and r block They must also include the name and address of each organization to which you contributed the other interests, the place where any such tangible property is located or kept, and the name of any person in possession of the property, other than the organization to which you contributed it. H and r block The terms of any conditions attached to the contribution of property. H and r block Deductions of At Least $250 But Not More Than $500 If you claim a deduction of at least $250 but not more than $500 for a noncash charitable contribution, you must get and keep an acknowledgment of your contribution from the qualified organization. H and r block If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that shows your total contributions. H and r block The acknowledgment must contain the information in items (1) through (3) under Deductions of Less Than $250 , earlier, and your written records must include the information listed in that discussion under Additional records . H and r block The acknowledgment must also meet these tests. H and r block It must be written. H and r block It must include: A description (but not necessarily the value) of any property you contributed, Whether the qualified organization gave you any goods or services as a result of your contribution (other than certain token items and membership benefits), and A description and good faith estimate of the value of any goods or services described in (b). H and r block If the only benefit you received was an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in a commercial transaction outside the donative context, the acknowledgment must say so and does not need to describe or estimate the value of the benefit. H and r block You must get it on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. H and r block Deductions Over $500 You are required to give additional information if you claim a deduction over $500 for noncash charitable contributions. H and r block See Records To Keep in Publication 526 for more information. H and r block Out-of-Pocket Expenses If you give services to a qualified organization and have unreimbursed out-of-pocket expenses related to those services, the following two rules apply. H and r block You must have adequate records to prove the amount of the expenses. H and r block If any of your unreimbursed out-of-pocket expenses, considered separately, are $250 or more (for example, you pay $250 or more for an airline ticket to attend a convention of a qualified organization as a chosen representative), you must get an acknowledgment from the qualified organization that contains: A description of the services you provided, A statement of whether or not the organization provided you any goods or services to reimburse you for the expenses you incurred, A description and a good faith estimate of the value of any goods or services (other than intangible religious benefits) provided to reimburse you, and A statement that the only benefit you received was an intangible religious benefit, if that was the case. H and r block The acknowledgment does not need to describe or estimate the value of an intangible religious benefit (defined earlier under Acknowledgment ). H and r block You must get the acknowledgment on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. H and r block Car expenses. H and r block   If you claim expenses directly related to use of your car in giving services to a qualified organization, you must keep reliable written records of your expenses. H and r block Whether your records are considered reliable depends on all the facts and circumstances. H and r block Generally, they may be considered reliable if you made them regularly and at or near the time you had the expenses. H and r block   For example, your records might show the name of the organization you were serving and the dates you used your car for a charitable purpose. H and r block If you use the standard mileage rate of 14 cents a mile, your records must show the miles you drove your car for the charitable purpose. H and r block If you deduct your actual expenses, your records must show the costs of operating the car that are directly related to a charitable purpose. H and r block   See Car expenses under Out-of-Pocket Expenses in Giving Services, earlier, for the expenses you can deduct. H and r block How To Report Report your charitable contributions on Schedule A (Form 1040). H and r block If your total deduction for all noncash contributions for the year is over $500, you must also file Form 8283. H and r block See How To Report in Publication 526 for more information. H and r block Prev  Up  Next   Home   More Online Publications