Tips for Year-End Charitable Contributions

Posting by Glenn Bailey

The IRS has issued a news release (IR 2014-110) to remind taxpayers of the important tax law rules and documentation requirements that they should follow when making donations to charity.
Rules for donations of clothing and household items. To be deductible, clothing and household items donated to charity must be in good used condition or better. Clothing or household items (e.g., furniture, furnishings, electronics, appliances, and linens) for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Be aware of this rule and the value you intend to claim before you make the donation. In practice, this is a burden that few taxpayers are willing to bear, which can result in them receiving no benefit at all. Donors must get a written acknowledgment from the charity for all gifts worth $250 or more that includes the name of the charity, date of the contribution and a description of the items contributed. In practice you should have this receipt for all donations of property. If a donation is left at a charity’s unattended drop site, you should keep a written record of the donation that includes this information. It is good practice to take pictures of your items to substantiate their condition as well as their existence. Make an itemized list of your contribution and note the value of each item prior to making the donation. Receipts that have generic listings like “3 bags of clothes: $500” have been disallowed due to a lack of detail that is considered a lack of substantiation by IRS.
The deduction for a car, boat or airplane donated to charity is generally limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. You must get a Form 1098-C, or equivalent from the organization and attach it to your tax return.
Guidelines for monetary donations. Donations of money include those made in cash or by check, electronic funds transfer, credit card, and payroll deduction. Regardless of the amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity, the date, and amount of the contribution. Bank records include canceled checks, bank or credit union and credit card statements. Statements should show the name of the charity, the date, and the amount paid. Cash donated without a receipt is not tax deductible. Donations charged to a credit card are deductible in the year the charge is recorded. Donations by check are deductible in the year the check is mailed. This is true even if the bill isn’t paid or the check isn’t deposited until the following year.
For payroll deductions, the taxpayer should retain a pay stub or other document from the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
Other Rules. In addition, don’t forget 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. It is important that this statement be dated, include the name of the charity, the amount given and the date and include either a statement that “no goods and services were received in exchange for the donation” or an estimate of the value of the items that were received. Failure to have a proper acknowledgement in your possession will make your donation non-deductible.
Only donations to qualified organizations are tax-deductible. Donations to individuals are not considered qualified charitable donations and are never deductible.

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