As with most tax laws, charitable contribution tax deductions have
changed this year.
Charitable Contributions for older owners of individual retirement
accounts (IRA) is scheduled to expire December 31, 2011. If you are not
aware, an IRA owner, age 70 ½ or older, can directly transfer TAX-FREE
up to $100,000 to an eligible charity. This is available for
distributions from IRAs even if the owner does not itemize their
deductions. However, a distribution from an employer-sponsored
retirement plan, a SIMPLE IRA and a SEP are not eligible for this
transfer option. To qualify, the funds must be contributed directly by
the IRA trustee to the eligible charity. Amounts transferred in this
manner are not taxable and no deduction is available for the transfer.
Amounts transferred to a charity from an IRA are counted in determining
whether the owner has met the IRA’s required minimum distribution.
Clothing and household items that are donated to a charity must be in
good condition or better. The only exception is if a qualified appraisal
has been purchased. Household items include furniture, electronics and
appliances.
*Most charitable contributions are in the form of money. To be
deductible, REGARDLESS OF THE AMOUNT, a bank record or written document
from the charity MUST be in your possession. Many people think “cashâ€
with no receipts are deductible, unfortunately this is NOT the case. It
is always better to have a canceled check, a bank statement or a credit
card statement that shows the name of the charity, the date of the
contribution and the amount given. A credit card statement must also
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.
Contributions are deductible only in the year they are made. Donations
charged to a credit card before the end of the year count for the year
they were charged. This is true even if the credit card bill isn’t paid
until the following year. Only donations to qualified organizations are
tax-deductible. This includes churches, synagogues, temples, mosques and
government agencies.
For all donations of property, including clothing and household items,
you should get 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.
The deduction for a motor vehicle, a boat or even an 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 charity will
provide a Form 1099-C and this form must be included with the tax return.
Remember, keep good organized records and receipts and you will
“survive†an audit.
