CHARITABLE GIVING

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CHARITABLE GIVING


Getting the Tax Benefit You Deserve

A tax deduction may not be foremost in your mind when making a contribution this year, but everyone should take full advantage of the tax benefits available to them as a result of their generosity. If you intend to itemize and claim a deduction, keep a few things in mind:

  • To deduct a charitable contribution, you must file Form 1040 and itemize the deductions on Schedule A.

There may be some limitations to your deduction. IRS Publication 526 explains the rules and limits that apply to deductions of charitable contributions.

  • Make sure the organization is tax-exempt under section 501(c)(3) of the tax code.

Most legitimate charities have either obtained or applied with the IRS for tax-exempt status under section 501(c)(3) of the tax code. You can check an organization's tax status by visiting websites such as the IRS, which has a searchable database of charitable organizations, or Guidestar. Keep in mind that these websites may not always contain the most up to date information. If you're considering giving to an organization that isn't listed on the sites or in an IRS publication, ask the group for evidence that it has applied for 501(c)(3) status.

Note that houses of religious worship such as churches, synagogues, mosques and temples are not required to apply to the IRS to be qualified as charities, so a contribution to such an organization will generally be deductible even if it does not appear on the IRS list.

Please remember that you can also make tax-deductible contributions to government entities, like states, municipalities, and federal relief agencies.

Also, keep in mind that donations to non-qualified foreign charities may not be deductible.

  • For contributions under $250, make sure to get a receipt, request an acknowledgment, or keep your cancelled check.
     
  • For larger contributions of $250 or more:

If you're making a contribution of $250 or more and aren't receiving anything of value from the charity in return, you need to obtain a letter from the charity acknowledging the gift and confirming that it wasn't made in exchange for something valuable. A cancelled check is NOT enough!

If you're making a donation of $75 or more and are receiving something from the charity in return—such as a meal, service, or product—obtain a letter indicating how much you donated and the value of what you received in return. You can only deduct the amount of your gift in excess of what you got in return.

  • For contributions of property valued at over $500.

If you’re donating property worth more than $500 for all contributed property, to claim a deduction, you must attach to your return IRS Form 8283, Noncash Charitable Contributions, which requires a signature from the donee organization acknowledging the donation.

  • For contributions of property valued at over $5,000.

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 the declaration of a qualified appraiser.

  • Additional rules for non-cash contributions.

If you give a used car or truck to a charity, be advised that Congress recently changed the rules governing your deduction. If the charity uses the vehicle in its programs or makes substantial improvements to it (as in an auto shop vocational program), you can still deduct its full value. But if the charity merely sells the car (as is usually the case), your deduction will be limited to the amount it receives from the sale. The charity is required to report to you the amount it receives.

If you donate used clothing, linens, and household goods such as furniture or appliances to a charitable organization, you can deduct the value of the items donated. The value of these items may be much less than the price you paid when they were new. The price that buyers of these used items actually pay in used clothing stores, consignment or thrift shops, or other second hand stores is a good indication of their value.

  • Donations of personal services, rent-free use of office space, and interest-free loans aren't tax-deductible. (Of course, they're still needed and appreciated!)
  • Deduction of expenses incurred in performing volunteer services.

You may deduct the out-of-pocket expenses that you incur in performing volunteer services for a charity, such as a mileage allowance for driving your car. In general, if you drive your car or truck in performing volunteer charitable work, you are entitled to deduct a mileage allowance of 14 cents per mile.

  • Keep in mind the limits for charitable deductions.

If you give cash, you generally cannot take deductions for charitable contributions in excess of 50% of your "adjusted gross income" (i.e., the amount at the bottom of the first page of an itemized federal tax return). If you give property, your deductions usually cannot exceed 30% of your "adjusted gross income."

Different limitations apply to corporate donations, but, generally, corporations can deduct gifts up to a total of 10% of their taxable income.

  • Maintain records.

Make sure that you retain all receipts and required documentation of your charitable contributions for at least three years (many tax advisers recommend keeping all tax records for at least seven years). Be sure to record out-of-pocket expenses for charitable work such as mileage, parking fees, tolls, bus or taxi fares, along with the name of the charity, the date of the expense, and the amount.

  • Talk to a tax professional.

If you are planning to make a substantial donation of cash or property, be sure to talk to a tax professional—a lawyer, accountant, or enrolled agent—to determine how it will affect your taxes.

  • For Special Rules for 2009, see IRS Publication 526, which will be posted on www.IRS.gov/ in January 2010.

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