With the holiday season upon us, many of you give generously to your
favorite charities and we applaud your efforts. However, to ensure that
your donations are tax deductible, there are a number of important
points to keep in mind.
Rules for Charitable Contributions of Clothing and Household Items
Household items include furniture, furnishings, electronics, appliances
and linens. Clothing and household items donated to charity generally
must be in good used condition or better to be tax deductible. A
clothing or household item worth over $500 does not have to meet this
standard if you include a qualified appraisal of the item with your
return.
To be deductible, you must generally get a receipt from the charity
showing the date and place of the contribution and a description of the
property. However, for gifts under $250, if it is impractical to obtain a
receipt (e.g., goods are delivered to an unattended drop site) a
receipt is not required if you have written records with the same
information as required for gifts over $500 (as described below).
If the gift is worth $250 or more, you must get a written
acknowledgment from the charity that includes a description of what was
donated and when, and a statement either that no goods or services were
rendered in return for the donation or describing and valuing what the
charity provided in return. The acknowledgment must be obtained by the
time the tax return for the year of the donation is filed or due,
whichever comes first.
If the amount of your deduction for all similar non-cash
contributions (such as clothing, jewelry, furniture, electronic
equipment, household appliances) is over $500, you must keep written
records that (1) indicate the appropriate date each non-cash item was
acquired, (2) include a reasonably detailed description of the donated
property along with its condition, (3) estimate the purchase price of
the item, (4) describe its current retail (usually second-hand or
thrift-store) value, and (5) explain how this value was determined
(e.g., from the Salvation Army’s online donation guide). If the amount
of your deduction for all similar non-cash contributions is over $5,000,
you’ll generally need to have the items appraised by a qualified
appraiser.
Guidelines for Monetary Donations
You must have a bank record or a written statement from the charity to
deduct any donation of money, regardless of amount. The record must show
the name of the charity and the date and amount of the contribution.
Bank records include canceled checks, and bank, credit union, 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, you should retain a pay stub, a Form W-2 wage statement or
other document furnished by your employer showing the total amount
withheld for charity, along with the pledge card showing the name of the
charity.
These requirements do not change the long-standing requirement that
you must 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.
Other Important Reminders
Other important reminders to keep in mind while planning your holiday and year-end charitable giving include the following:
•
Qualified Charities. It is important to check to see if the
charity is eligible to receive tax-deductible donations. “Select Check,”
a searchable online tool available on IRS.gov, lists most such eligible
organizations. In addition, churches, synagogues, temples, mosques and
government agencies are eligible to receive deductible donations, even
if they are not listed in the tool’s database.
•
Year-end Gifts. Contributions are deductible in the year made.
Thus, donations charged to a credit card before the end of 2014 count
for 2014, even if the credit card bill isn’t paid until 2015. Also,
checks count for 2014, as long as they are mailed in 2014.
•
Itemize Deductions. 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.
•
Special Rules for Cars Boats, and Airplanes. The deduction for
a car, 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. The organization must give you Form 1098-C or a similar
statement that you can attached to your tax return.Please give us a call
if you have any questions or need further information,
Very truly yours,
Your trusted advisors at KatzAbosch
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