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Tips for Year-End Donations

 

"Individuals and businesses making contributions to charity should keep in

mind several important tax law provisions that have taken effect in recent years.

One provision offers older owners of individual retirement arrangements (IRAs) a different way

to give to charity. There are also rules designed to provide both taxpayers and the

government greater certainty in determining what may be deducted as a charitable

contribution. Some of these changes include the following.

Special Charitable Contributions for Certain IRA Owners

An IRA owner, age 70 ½ or over, can directly transfer tax-free up to $100,000 per year to an

eligible charitable organization. This option, created in 2006 and recently extended through

2009, is available to eligible IRA owners, regardless of whether they itemize their deductions.

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.

Transferred amounts are counted in determining whether the owner has met the IRA’s

required minimum distribution rules. Where individuals have made nondeductible contributions

to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable

funds, instead of proportionately from taxable and nontaxable funds, as would be the case

with regular distributions. See Publication 590, Individual Retirement Arrangements (IRAs), for

more information on qualified charitable distributions.

Rules for Clothing and Household Items

 

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 a taxpayer claims a deduction of

over $500 does not have to be in good used condition or better if the taxpayer includes a

qualified appraisal of the item with the return. Household items include furniture, furnishings,

electronics, appliances, and linens.

Guidelines for Monetary Donations

 

To deduct any charitable donation of money, regardless of amount, a taxpayer must have a

bank record or a written communication 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. Bank or credit union statements should show

the name of the charity, the date, and the amount paid. Credit card statements should show

the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit

card, and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a

Form W-2 wage statement or other document furnished by the employer showing the total

amount withheld for charity, along with the pledge card showing the name of the charity.

These requirements for monetary donations do not change or alter the long-standing

requirement that a taxpayer 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.

To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following

additional reminders:

 

Contributions are deductible in the year made. Thus, 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. Also, checks count for 2008 as long as they are mailed this

year.

 

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. The

searchable online version can be found at IRS.gov under “ Search for Charities.” In

addition, churches, synagogues, temples, mosques and government agencies are

eligible to receive deductible donations, even though they often are not listed in

Publication 78.

 

For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A

can claim deductions for charitable contributions. This deduction is not available to

people who choose the standard deduction, including anyone who files a short form

(Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized

deductions (mortgage interest, charitable contributions, state and local taxes, etc.)

exceeds the standard deduction. Use the 2008 Form 1040 Schedule A, available now

on IRS.gov, to determine whether itemizing is better than claiming 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 the amount of a taxpayer’s deduction for all noncash contributions is over $500, a

properly-completed Form 8283 must be submitted with the tax return." IR-2008-138, Dec. 9, 2008

 

For additional information on charitable giving:

Visit IRS.gov and click on " Charities and Non-Profits."

See IRS Publication 526, Charitable Contributions.

Review the on-line mini-course, Can I Deduct My Charitable Contributions?

IRS Offers Tips for Year-End Donations http://www.irs.gov/newsroom/article/0,,id=201076,00.html