The Internal Revenue Service recently offered tips for year-end charitable contributions. You may want to review these in order to get the expected tax benefit from your donations.
- An IRA owner, age 70-½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charitable organization. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible. To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the amount given to the charity. Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.
- To be deductible, clothing and household items donated to charity 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 be in good used condition or better if you include a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances, and linens.
- To deduct any charitable donation of money, regardless of amount, you must have a bank record, credit card statement, or a written communication from the charity showing the name of the charity and the date and amount of the contribution. These records should show the name of the charity, the date, and the amount paid. These requirements for monetary donations do not change or alter the long-standing requirement that you obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet the requirements of both provisions.
- Contributions are deductible in the year made. Donations charged to a credit card before the end of the year count for 2008. This is true even if the credit card bill isn’t paid until next year. Checks count for 2008 as long as they are mailed this year.
- Check that the organization is qualified. To check, go to IRS.gov and click “Search for Charities.” Churches, synagogues, temples, mosques, and government agencies are eligible to receive deductible donations, even though they often are not listed.
- For individuals, you can only claim charitable contributions if you itemize deductions. You will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction.
- For all donations of property, including clothing and household items, get from the charity, if possible, a receipt 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. Additional rules apply for a contribution of $250 or more.
- The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value of the vehicle is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
- If your deduction for all noncash contributions is over $500, a properly completed Form 8283 must be submitted with the tax return.
If you need help in planning your year-end charitable contributions, email me or call me at 214.957.3366.
Ronnie
Copyright 2008 Ronnie C. McClure, PhD, CPA
