Americans donated an estimated $295 billion to different
charities in 2006, a new record, according to “Giving
USA 2007,” a report from the Giving USA Foundation. Our
generosity allows us to make a difference to a wide
range of worthy causes.
There’s a reward for this generosity, too, because it
also qualifies you to take tax deductions for your
donations. Recent changes in the tax law have made a
difference on which deductions you are allowed to claim,
however, advises the North Carolina Association of CPAs.
GET IT
IN WRITING
First, you should be aware that you can only claim a
charitable donation if you itemize on your tax return.
In general, you are allowed to deduct your contributions
of cash, checks or other monetary gifts to a qualified
tax-exempt organization, such as a house of worship or
charity. In the past, it might have been acceptable to
keep personal notes showing that you had dropped some
cash in the collection plate. Under the new rules, when
you donate cash, you will need documentation.
If you give money, your documentation can be a cancelled
check or a bank, credit union or credit card statement
showing the donation. If you give monetary gifts, you
will need a written record of what you gave. No matter
what you give, a bank record or a receipt from the
charity must include the organization’s name, the amount
of the contribution and the date of the donation. If you
donate through a payroll deduction, you will need a pay
stub, Form W-2 wage statement or some other
documentation from your company showing how much was
withheld, along with a pledge card that gives the name
of the charity. Without these records, you won’t qualify
for a deduction.
TAKE
PICTURES
We all know that any non-monetary items donated to a
charity should be in good, useable condition, but the
Internal Revenue Service now requires that taxpayers
prove that they are. This applies to all clothing and
household items, which the IRS defines as furniture,
furnishings, electronics, appliances, etc.
If you donate something now and you are questioned about its
condition a year later, it will be difficult to
establish that it was in good condition. As a result,
CPAs advise that you photograph your donated items and
make notes about their condition.
CONFIRM THE VALUE
In some cases, a receipt from a charity may not be
sufficient to get your deduction. If you claim more than
a $5,000 income tax deduction for items other than
readily valued property, the property must be appraised.
CHECK
THE GROUP’S QUALIFICATIONS
You can only deduct donations made to groups that the
IRS considers to be “qualified.” In general, that means
that the group is a religious, charitable, educational
or other philanthropic organization approved by the IRS
to receive deductible contributions.
If you want advice on charitable giving, your CPA can help
you understand the guidelines.
