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.
If you've made significant donations and plan to itemize rather than take the standard deduction during tax season, then this tool may be helpful. If you made cash donations to a qualifying charitable organization, you may also be able to claim a limited deduction on your 2021 federal tax return, even if you take the standard deduction.
You can get ItsDeductible online and as a mobile app in the App Store. Here's how it works.
- TurboTax ItsDeductible is a type of software that may help you determine the value of your charitable donations so that you can accurately deduct them at tax time.
- It's available online as well as in the App Store.
- After setting up a free account, you can select the charity, item, quantity, and value. The software will find the fair market value for you so that your donations are accurately valued for your tax return.
- In order to deduct charitable donations, you'll need to itemize your deductions. If you haven't made a significant amount of donations, work with a tax professional to determine if itemizing is the right move for you.
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 enter the kind of item you donated, its quantity, and its value, whether high or medium. (Tax law changes in 2006 caused ItsDeductible to stop allowing entries for low-value goods.)
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.
When it comes time to prepare your taxes, you can simply import the data from ItsDeductible into TurboTax.
How ItsDeductible Determines 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.
"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," the website states. "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 on 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.
Itemized Deductions vs. Standard Deductions
Deducting charitable donations usually means itemizing your deductions rather than taking the standard deduction. However, you may be able to claim a limited deduction for cash donations made in 2021.
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.
For tax year 2021, the standard deduction is $12,550 for individuals and heads of household, and $25,100 for those taxpayers who are married and file jointly.
When you itemize your deductions, you 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
- Summary of donations
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.
References 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.
How Do I Import ItsDeductible Into TurboTax?
Open or continue your tax return in the TurboTax software. Search for "donations" and click on the "jump to" link. Answer the question about whether or not you made donations to charity (answer yes to move to the next step). Answer yes to the next question about having an ItsDeductible account. Your donations will automatically load. On the next screen, select your donations and click "Import Now." Click continue to review your final list.
Why Do ItsDeductible Items Change in Value After Inputing Them Into TurboTax?
ItsDeductible gives estimated values for items. These estimates are updated once per year. After they're imported into TurboTax, the value may change to match the current fair market value.