Why are charitable contributions deductible, anyway? 

In short, the Federal government is providing an indirect subsidy to 									thousands of social, civic, 									cultural, religious and 									educational organizations 									throughout the country by 									encouraging private citizens 								to redistribute their wealth to 								benefit society as a whole.  

								How can you take the 									deduction?

								You must file a Form 1040 with 								Schedule A to itemize your 								deductions.

The contribution must be given to a qualified organization, not to specific individuals, political organizations or candidates.

The deduction is only for the contribution.  If you derive a benefit along with your contribution, you must exclude the fair market value of the benefit, such as tickets, dinner or other goods and services.

Donations of stock or other non-cash property are typically valued at their fair market value.

Donations of clothing and household items must be in good condition (or better) and are typically valued at thrift shop value.

Special rules apply for vehicles, boats and planes.

Keep your receipts. Recordkeeping is important for claiming the deduction.  

There are many types of acceptable receipts including, but not limited to, bank, credit card or text message records and payroll deductions.  

For gifts of cash or property of $250 or more, you may use a written acknowledgement from the organization instead of (or in addition to) a receipt.

For non-cash gifts of $500 or more, you must also complete Form 8283, Noncash Charitable Contributions.

Donations of an item or a 
group of similar items valued 
in excess of $5,000 are also 
reported on Form 8283.  
Generally, an appraisal by a 
qualified appraiser is 
2. S Corporation Shareholder

S Corporation Shareholder/
Officers are also considered 
employees, if they are 
performing duties for the 
company, and, as such must 
be paid a “reasonable” salary.

The Internal Revenue Code does not provide guidance in defining “reasonable,” however; courts have decided these cases based on facts and circumstances. 

A number of factors have been given consideration in determining a “reasonable” salary, including, but not limited to, the officers duties and responsibilities, as well as the time and effort they devote to the business.  

S Corporations should use good judgment when accounting for cash distributions or other deductions that could be considered Officer’s Compensation.  The IRS could reclassify these distributions and/or deductions, thereby subjecting the S Corporation to additional taxes, as well as significant penalties.
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