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Not All Giving is Deductible

Stacie Kitts, CPA is a partner at Katherman Kitts & Co. LLP

On occasion I run across a taxpayer who “helped” out a family or a friend and wants to deduct the money given as a charitable contribution.  They are always shocked to find out that helping your neighbor isn’t tax deductible unless its through a charitable organization.

Charity is good, but if you want to deduct it, be sure to check out the items below.

If you make a donation to a charity this year, you may be able to take a deduction for it on your 2011 tax return. Here are the top nine things the IRS wants every taxpayer to know before deducting charitable donations.

  1. Make sure the organization qualifies Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization or check IRS Publication 78, Cumulative List of Organizations. It is available at www.IRS.gov.
  2. You must itemize Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.
  3. What you can deduct You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
  4. When you receive something in return If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.
  5. Recordkeeping Keep good records of any contribution you make, regardless of the amount. For any cash contribution, you must maintain a record of the contribution, such as a cancelled check, bank or credit card statement, payroll deduction record or a written statement from the charity containing the date and amount of the contribution and the name of the organization.
  6. Pledges and payments Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, you can only deduct $200.
  7. Donations made near the end of the year Include credit card charges and payments by check in the year you give them to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
  8. Large donations For any contribution of $250 or more, you need more than a bank record. You must have a written acknowledgment from the organization. It must include the amount of cash and say whether the organization provided any goods or services in exchange for the gift. If you donated property, the acknowledgment must include a description of the items and a good faith estimate of its value. For items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attach the form to your return. If you claim a deduction for a contribution of noncash property worth more than $5,000, you generally must obtain an appraisal and complete Section B of Form 8283 with your return.
  9. Tax Exemption Revoked Approximately 275,000 organizations automatically lost their tax-exempt status recently because they did not file required annual reports for three consecutive years, as required by law. Donations made prior to an organization’s automatic revocation remain tax-deductible. Going forward, however, organizations that are on the auto-revocation list that do not receive reinstatement are no longer eligible to receive tax-deductible contributions.

For the list of organizations whose tax-exempt status was revoked, visit www.IRS.gov. For general information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available at www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Links:

IRS Reminds Taxpayers How To Provide Earthquake Relief For Japan

By Stacie Clifford Kitts, CPA

The IRS today issued a reminder for individuals, businesses and charitable organization that wish to provide assistance to the victims of Japan’s devastating 8.9 magnitude earthquake.

Its important to remember, if you make charitable contributions to qualified U.S. charities that provide assistance to foreign country’s, your contribution is tax deductible.  Making contributions to an organization or individual that is not a qualified U.S. organization will not get you a tax deduction.

Many individuals, businesses and charitable organizations wish to provide assistance to the victims of Japan’s recent earthquake. Consult Disaster Relief Resources for Charities and Donors on IRS.gov to get information about how to provide assistance to victims through a charitable organization.

Contributions to domestic tax-exempt, charitable organizations that provide assistance to individuals in foreign lands qualify as tax-deductible contributions for federal income tax purposes, provided that the U.S. organization has control and discretion over the use of funds. Donors should ensure that they make contributions to qualified charities. Use the Search for Charities function on IRS.gov to see if the charity you intend to support is a qualified charity listed in Pub. 78.  Certain organizations, such as churches or governmental organizations, may be qualified to accept charitable contributions, even though they are not listed in Pub. 78.

IRS Patrol:Qualified Disaster Treatment for Haiti

Washington — The Internal Revenue Service issued guidance that designates the earthquake in Haiti in January 2010 as a qualified disaster for federal tax purposes. The guidance allows recipients of qualified disaster relief payments to exclude those payments from income on their tax returns. Also, the guidance allows employer-sponsored private foundations to assist victims in areas affected by the January 2010 earthquake in Haiti without affecting their tax-exempt status.

Charities usually fall into one of two categories — public charities or private foundations. Under the tax law, a private foundation that is employer-sponsored may make qualified disaster relief payments to employees affected by a qualified disaster. These payments generally include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance. Again, these payments would not be included in the individual recipient’s gross income.

Qualified disasters include Presidentially declared disasters and any other event that the Secretary of the Treasury determines to be catastrophic. The IRS has determined that the earthquake in Haiti that occurred this month is an event of catastrophic nature for purposes of the federal tax law.

The IRS will presume that qualified disaster relief payments made by a private foundation to employees and their family members in areas affected by the earthquake in Haiti to be consistent with the foundation’s charitable purposes.

Tax Planning Reminder – Charitable Contributions

[Stacie says: this is an IRS reminder about charitable giving. As noted below, only persons who itemize deductions on schedule A are eligible to take a charitable deduction. And – donations made to a qualified organization are deductible in the year donated. Here’s a summary of what you need to remember:

    1) IRA Owners for this year only (unless extended) if you are 70 1/2 or older you can tansfer tax free up to $100,000 to charity. See below for more information.

    2) If you donated clothes or household items, they must be in good or better condition. If the amount is over $500, attach a completed Form 8283 to the return.

    3) If you donate cash you need a receipt, a cancelled check, bank confirmation of the donation, or written acknowledgement from the charity for your donation to be deductible. Remember giving cash to the Santa on the corner will not be deductible unless he is associated with a qualified charity and you pay with check or get written acknowledgement from the charity.

    4) If you donate a car to charity, remember that the deductible portion is generally limited to the amount the charity gets from the sale of the vehicle. Remember to get a copy of Form 1098-C from the charity.]

Watch Video: Year-End Tax Tips: English Spanish ASL Watch Video: Record Keeping: English ASL

WASHINGTON — Individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years.

Some of these changes include the following:

Special Charitable Contributions for Certain IRA Owners
This provision, currently scheduled to expire at the end of 2009, offers older owners of individual retirement accounts (IRAs) a different way to give to charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity. This option, created in 2006, is available for distributions from IRAs, regardless of whether the owners 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 transfer.
Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.

Amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution. 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 generally 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 meet this standard 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 the deduction of monetary donations do not change 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 both requirements.

Reminders
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 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. 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 if they 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 individuals 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.) exceed the standard deduction. Use the 2009 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 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.

For additional information on charitable giving:
Charities & Non-Profits
Publication 526 , Charitable Contributions.
On-line mini-course, Can I Deduct My Charitable Contributions?

Did You Know Form 990 Has Been Redesigned? Here’s Some Help in Completing The New Form

[Stacie says: Hey, I checked this out and it is pretty good. Be sure to click through to the new on line tools.]

Thousands of tax-exempt organizations are in the process of gathering information and completing the redesigned 2008 Form 990. This new on-line tool uses a practical example to show organizations how to address key areas of the redesigned Form 990 and Schedules. An organization can compare its own situation to the case study and learn how to properly complete its own form.

Getting Started includes a sample filled-in Form 990 and Schedules A and O, prepared using information about a hypothetical organization’s mission, board of directors, financial information and policies. This series of seven, short, on-line videos explain how to complete key sections of the Form 990 and highlights some of the form changes. Find this new on-line resource as well as other resources for 990 filers on IRS.gov

Tips for Taxpayers Making Charitable Donations

Here is another Summertime Tax Tip from the IRS. Did I mention that I just love these?

Every year, millions of taxpayers itemize their deductions on their federal tax return. One of the most common itemized deductions is a donation made to a charitable organization.

Here are the top ten things the IRS wants every taxpayer to know before deducting charitable donations.

Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.

Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.

You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.

Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record – including a cancelled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the donor’s name, or a payroll deduction record.

Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.

Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.

For any contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash and a description of any property you contributed, and whether the organization provided any goods or services in exchange for the gift.

To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.
An appraisal generally must be obtained if you claim a deduction for a contribution of noncash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.

For more information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:
Form 8283, Noncash Charitable Contributions
Publication 526, Charitable Contributions

IRS Gives You Five Reasons to Visit IRS.gov

[Stacie says: The IRS wants you to visit their website this summer. And they give you five reasons why.]

IRS.gov is available 24 hours a day 7 days a week. Whether you need a form or have tax questions, IRS.gov has a wealth of information. IRS.gov is accessible all day, every day.

Here are five reasons to visit IRS.gov this summer.

Get information about the numerous tax breaks made available earlier this year in the American Recovery and Reinvestment Act.

Calculate the right amount of withholding allowances on your W-4. The IRS Withholding Calculator will help you ensure that you don’t have too much or too little income tax withheld from your pay.

Search for charities. Search Publication 78, Cumulative List of Organizations, to find out if an organization is exempt from federal taxation and, if so, how much of your contributions to that organization are tax deductible.

Get information about careers at the IRS. No matter what your professional specialty, the IRS can offer you a variety of full-time career or seasonal job opportunities.

Get tax forms and publications. You can view, download and order tax forms and publications any hour of the day or night.

Remember that for the genuine IRS Web site be sure to use .gov. Don’t be confused by internet sites that end in .com, .net, .org or other designations instead of .gov.

The address of the official IRS governmental Web site is http://www.irs.gov/.

Links:

The American Recovery and Reinvestment Act of 2009: Information Center
IRS Withholding Calculator
Search for charities

Charitable Contribution 50% Limit Information

By Stacie Clifford Kitts, CPA

If you itemize your deductions, (that means that you are completing a Schedule A-Itemized Deductions along with your Form 1040) you are entitled to take a deduction for your charitable contributions. However, there is a limit to how much of a deduction you can claim in a tax year.

Contribution deductions are limited to a percentage of your adjusted gross income. This means that your total contribution deductions cannot exceed 50%, 30%, or 20% of your adjusted gross income depending on the type of charitable organization you dontate to or the type of property that you donated.

If you donate cash to a 50% limit organization, the amount of your deduction is limited to 50% of your adjusted gross income. Any remaining amount can be deducted in each of the next 5 years until it is used up.

Only the following types of organizations are 50% limit organizations.

1) Churches, and conventions or association of churches

2) Educational organization with a regular faculty and curriculum that normally have a regularly enrolled student body attending classes on site.
3) Hospitals and certain medical research or-organizations associated with these hospitals.
4) Organizations that are operated only to receive, hold, invest, and administer property and to make expenditures to or for the benefit of state and municipal colleges and universities and that normally receive substantial support from the United States or any state or their political subdivisions, or from the general public.
5) The United States or any state, the District of Columbia, a U.S. possession (including Puerto Rico), a political subdivision of a state or U.S. Possession, or an Indian Tribal government or any of its subdivisions that perform substantial government functions.
6) Corporations, trusts, or community chests, funds, or foundation organized and operated only for charitable, religious, educational, scientific, or literary purposes, or to prevent cruelty to children or animals, or to foster certain national or international amateur sports competitions. These organizations must be “publicly supported,” which means they normally must receive a substantial part of their support, other than income from their exempt activities, from direct or indirect contributions from the general public or from government units.
7) Organizations that may not qualify as “publicly supported” under (6) but that meet other tests showing they respond to the needs of the general public, not a limited number of donors or other persons. They must normally receive more than one-third of their support either from organizations described in (1) through (6), or from persons other than “disqualified persons.”
8) Most organizations operated or controlled by, and operated for the benefit of, those organizations described in (1) through (7).
9) Private operating foundations.
10) Private non-operating foundations that make qualify distribution of 100% of contributions within 2 ½ months following the year they receive the contribution. A deduction for charitable contrition to any of these private non-operating foundations must be supported by evidence from the foundation confirming that it made the qualifying distributions timely. Attach a copy of this supporting data to your tax return.
11) A private foundation whose contributions are pooled into a common fund, if the foundation would be described in (8) above but for the right of substantial contributors to name the public charities that receive contributions from the fund. The foundation must distribute the common fund’s income within 2 ½ months following the year in which it was realized and must distribute the corpus not later than 1 year in which it was realized and must distribute the corpus not later than 1 year after the donor’s death (or after the death of the donor’s surviving spouse if the spouse can name the recipients of the corpus.)

Some Important Facts about Tax Exempt Organizations

Every year, millions of taxpayers donate money to charitable organizations. Here are six things you should know about the tax treatment of tax-exempt organizations.

Tax returns are made available to public. Exempt organizations generally must make their tax return available for public inspection. This also includes the organization’s application for exemption. These documents must be made available to any individual who requests them, and must be made available immediately when the request is made in person. If the request is made in writing, an organization has 30 days to provide a copy of the information.

Donor lists generally are not public information. The list of donors filed with Form 990 is specifically excluded from the information available for public inspection. There is an exception for donors to private foundations and political organizations, which must make their donor list available to the public.

How to find tax-exempt organizations. The easiest way to find out whether an organization is qualified to receive deductible contributions is to ask them, as most will be able to tell you. You can also search for organizations qualified to accept deductible contributions in IRS Publication 78, available online at IRS.gov.

Which organizations may accept charitable contributions. Not all exempt organizations are eligible to receive tax-deductible charitable contributions. Organizations that are eligible to receive deductible contributions include most charities described in section 501(c)(3) of the Internal Revenue Code and, in some circumstances, fraternal organizations described in section 501(c)(8) or section 501(c)(10), cemetery companies described in section 501(c)(13), volunteer fire departments described in section 501(c)(4), and veterans organizations described in section 501(c)(4) or 501(c)(19). For more general information on the rules for Charitable Contribution Deductions, you can go to the IRS Publication 78 Help page, Part II, which is linked from the Search for Charities page on IRS.gov.

Requirement for organizations not able to accept deductible contributions. If an exempt organization is ineligible to receive tax-deductible contributions, it must disclose that fact when soliciting contributions.

How to report inappropriate activities by a charity. If you believe that the activities or operations of a tax-exempt organization are inconsistent with its tax-exempt status, you may file a complaint with the Exempt Organizations Examination Division by completing Form 13909, Tax-Exempt Organization Complaint (Referral) Form. The complaint should contain all relevant facts concerning the alleged violation of tax law. Form 13909 is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:
IRS Publication 526, Charitable Contributions (PDF)
Search for Charities Using Publication 78
Form 13909, Tax-Exempt Organization Complaint (Referral) Form (PDF)

Tips for Deducting Charitable Contributions

When preparing to file your federal tax return, don’t forget your contributions to charitable organizations. Your donations could add up to a sizeable tax deduction if you itemize on IRS Form 1040, Schedule A.
Here are a few tips to ensure your contributions pay off on your tax return:
Contributions must be made to qualified organizations to be deductible. You cannot deduct contributions made to specific individuals, political organizations and candidates.

You cannot deduct the value of your time or services. Nor can you deduct the cost of raffles, bingo or other games of chance.
If your contributions entitle 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.

Donations of stock or other property are usually valued at the fair market value of the property. Special rules apply to donation of vehicles.
Clothing and household items donated must generally be in good used condition or better to be deductible.

Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution.
To claim a deduction for contributions of cash or property equaling $250 or more you must obtain a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document from the organization may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.
If you claim a deduction of more than $500 for all contributed property, you must attach IRS Form 8283, Noncash Charitable Contributions, to your return.
Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser.
Contributions made for relief efforts in a Midwest disaster area receive special benefits. For more information, see Publication 4492-B, Information for Affected Taxpayers in the Midwest Disaster Areas.
For more information on charitable contributions, check out Publication 526, Charitable Contributions, which is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Links:
Search for Charities or download Publication 78, Cumulative List of Organizations
Publication 526, Charitable Contributions (PDF 178K)
Publication 561, Determining the Value of Donated Property (PDF 101K)
Form 1040, U.S. Individual Income Tax Return (PDF 176K)
Schedule A, Itemized Deductions (PDF 116K)
Form 8283, Noncash Charitable Contributions (PDF)
Instructions for Form 8283, Noncash Charitable Contributions (PDF)

Special Charitable Contributions for Certain IRA Owners

As an alternative method for donating to a charity, certain taxpayers may transfer funds from their IRA to an eligible charitable organization. Here are ten things taxpayers who are thinking about making such a donation will need to know.
1. The IRA owner must be age 70 ½ or older.
2. The donor must directly transfer the money tax-free to an eligible organization.
3. The maximum amount that an IRA owner may transfer annually tax-free is $100,000 to an eligible organization.
4. This option, created in 2006 and recently extended through 2009, is available to eligible IRA owners, regardless of whether they itemize their deductions.
5. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension plans – commonly referred to as SEP Plans – are not eligible.
6. To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity.
7. Amounts transferred are not taxable and no deduction is available for the amount given to the charity unless nondeductible contributions are transferred.
8. Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.
9. 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. If nondeductible contributions are transferred to an eligible organization, a charitable contribution deduction may be allowed if itemizing deductions.
10. More information about qualified charitable distributions can be found in Publication 590, Individual Retirement Arrangements.

Tips for Year End Donations

IRS Offers Tips for Year-End Donations IR-2008-138, Dec. 9, 2008

WASHINGTON — 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.

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?

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