the benefit. If you prepay interest, you must
allocate the interest over the tax years for which the interest applies.
You can deduct as itemized
deductions on Form 1040, Schedule A, your net investment income and
qualified residence interest. The investment interest is limited to interest
from your net investment income. In the old days, personal interest paid on
any loan such as a loan on a car, and credit card debt interest paid were
deductible.
Qualified residence interest and points are
generally reported to you on Form 1098 by the financial
institution to which you made the payments such as interest from
grandfathered debts, and any mortgage taken out after October 13, 1987, to
buy, build, or improve your home (called home acquisition debt) up to a
total of $1 million for this debt plus any grandfathered debt. Also, a home
equity debt other than home acquisition debt taken out after October 13,
1987, up to a total of $100,000.
You may be able to take a credit against your
federal income tax if you were issued a mortgage credit
certificate by a state or local government for low-income
housing. To figure the amount of the credit, use Form 8396.
Charitable Contributions
Charitable contributions are deductible only if you
itemize deductions on Form 1040, Schedule A.To be deductible, charitable
contributions must be made to qualified organizations. Payments to
individuals are never deductible.To determine if the
organization that you have contributed to qualifies as a charitable
organization for income tax deductions, look the Exempt
Organizations at the IRS.gov website.
If your contribution entitles you to merchandise,
goods, or services, including admission to a charity ball, banquet,
theatrical performance, or sporting event, you can deduct only the amount
that exceeds the fair market value of the benefit received.
For a contribution of cash, check, or other
monetary gift (regardless of amount), you must maintain as a record of the
contribution a bank record or a written communication from the qualified
organization containing the name of the organization, the date of the
contribution, and the amount of the contribution. In addition to deducting
your cash contributions, you generally can deduct the fair market value of
any other property you donate to qualified organizations. See Publication
561, Determining the Value of Donated Property. For any contribution of $250
or more (including contributions of cash or property), you must obtain and
keep in your records a contemporaneous written acknowledgment from the
qualified organization indicating the amount of the cash and a description
of any property contributed. The acknowledgment must say whether the
organization provided any goods or services in exchange for the gift and, if
so, must provide a description and a good faith estimate of the value of
those goods or services. One document from the qualified organization may
satisfy both the written communication requirement for monetary gifts and
the contemporaneous written acknowledgment requirement for all contributions
of $250 or more.
