Wednesday, December 30, 2009

Tips on Year-End Charitable Giving

To be deductible, clothing and household items donated to charity generally must be in good used condition or better. A clothing or household item for which you claim a deduction of over $500 does not have to meet this standard if you include a qualified appraisal of the item with the return.

For all donations of property including clothing and household items, if possible, get a receipt from the charity that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value.

The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds the charity receives from its sale, if the claimed value is more than $500.

To deduct a charitable donation of money, regardless of amount, you must have a bank record or a written receipt from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements, IF they show the name of the charity, the date, and the amount paid. Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction.

Here are a few additional reminders:
• Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2009 count for 2009. This is true even if the credit card bill isn’t paid until 2010. Also, checks count for 2009 as long as they are mailed in 2009 and clear, shortly thereafter.

• Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78. Money given directly to an individual is not a charitable contribution.

• For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available if you choose the standard deduction or file a short form (Form 1040A or 1040EZ). Even then, you will have a tax savings only if the total of all itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceeds the standard deduction.

• There are other rules and restrictions governing the deductibility of charitable donations. Please contact me directly if you have questions about how this information affects your specific tax situation.