At tax time, you may be looking for help deducting your charitable contributions on your tax return in order to lower your taxable income and reduce your tax bill. TurboTax, a brand of tax preparation software, offers a tool called ItsDeductible that estimates the value of your noncash donations for you. You can then import that data into TurboTax to prepare your taxes.
You can get ItsDeductible online and as a mobile app for iOS.
How ItsDeductible Works
To use ItsDeductible, you'll set up a free account and fill in some basic personal information such as your name, tax filing status and approximate income. Then, you can select a charity and then enter the kind of item you donated, its quantity, and its value, whether high or medium. (After tax law changes in 2006, ItsDeductible stopped allowing entries for low-value goods.)
When it comes time to prepare your taxes, simply import the data from ItsDeductible into TurboTax.
Figuring out the value of your donations on your own can be difficult and potentially time-consuming. TurboTax offers the ItsDeductible tool to streamline the process for you, which can be especially handy when you're on the go.
How ItsDeductible Determines Its Values
When you deduct a charitable donation, the IRS requires you to estimate its fair market value. ItsDeductible uses market data from online auction sites, including eBay, as well as thrift stores and resale shops to help estimate a dollar value for your donated item.
The software maker explains its method for approximating the cash value of a donated item:
Every day, we're collecting info from thousands of completed eBay auctions to capture valuations that are not commonly found in thrift, consignment, or specialty stores.
We then perform a statistical analysis to determine the fair market value of the item, which in turn gets translated to a high, medium, or low value.
Because ItsDeductible bases its calculations in real-world transactions, it allows you to estimate fair-market values that comply with IRS guidelines.
IRS Rules on Charitable Donations
According to the IRS, a charitable contribution is a voluntary gift made to a qualified organization, without anything of value expected in return. If you're not sure whether the organization you donated to is a qualified one, you can ask, or you can look it up using the Tax Exempt Organization Search (TEOS) tool on the IRS website. Your contributions generally can't be more than 60% of your adjusted gross income (AGI), although exceptions may apply.
Itemizing Deductions vs. Standard Deduction
In order to deduct your charitable donation, you'll need to itemize your deductions rather than take the standard deduction. Therefore, it's important to calculate whether your total itemized deductions will be equal to or greater than the standard deduction, which varies based on marital status and other factors. There is no limit on itemized deductions since the Tax Cuts and Jobs Act.
The standard deduction increased after the tax law changes; for the 2019 tax year, the deduction is $12,200 for singles and $24,400 for married filing jointly.
Your itemizations can include not only charitable contributions, but also real estate taxes, mortgage interest, and medical expenses, among others.
You can print five types of donation reports in TurboTax ItsDeductible: item donations, money donations, mileage donations, stock donations, and summary. If you have an ItsDeductible account and one of TurboTax's software programs, you can import your deductions and generate IRS Form 8283, Non-cash Charitable Contributions. This form is necessary for contributions over $500.
Reference and Help
The TurboTax community is where you can ask questions and get tips relevant to the software. Answers and tips are provided by other ItsDeductible users and specialists.
You can also find links to IRS publications provided under the Help link at the top of ItsDeductible Online.
Who Should Use ItsDeductible
TurboTax ItsDeductible is easy to navigate, with intuitive links and drop-down selection lists. The service does not support uploading digital images as evidence of non-cash donations, however. Therefore, you may want to save photos like these on your own to prove the condition of the goods.
ItsDeductible works best for people who prepare their annual income tax return with TurboTax. This is because TurboTax directly imports data from ItsDeductible. If you do not use TurboTax to prepare income taxes, you can use the figures on a printed report from TurboTax ItsDeductible.
Save tax deduction-related digital images and receipts on a drive and store it with your yearly tax documents along with reports printed from ItsDeductible.