A TIME FOR GIVING

The holidays are approaching, as indicated by the Christmas-themed ads already appearing on tv.  The holidays are a time of giving gifts – to family and friends and to church and charity.  

It seems a good time to provide some reminders of the rules for deducting charitable contributions, taken from the 2011 Edition of my special report “Itemized Deductions: A Complete Guide to Schedule A”.

You must have a hard-copy receipt for every single dollar you contribute to a church or charity in order to claim a tax deduction on Schedule A!

Charitable contribution deductions will not be allowed for any monetary contributions by cash or check unless the donor maintains a record of the contribution. The record must be in the form of -

• an actual cancelled check,

• a bank record (i.e. a copy of the front of the check included on your monthly bank statement),

• an entry on a bank or credit card statement indicating a credit or debit card charge, or

• a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution.

You can no longer tell the IRS that you put a five or ten dollar bill in the collection plate each week. You must write a check to the church for the $5.00 or $10.00 each week or you must take advantage of the church's “envelope” system, which will provide you with a written receipt at the end of the year.

The law does not say that all contributions of more than $50.00 or more than $100.00 must be documented. It says that all cash contributions must be documented. So if you give the Salvation Army Santa at the mall a dollar for a poppy you must get a receipt!

You can claim a deduction for the “fair market value” of property, including used items, donated to charity.  According to the IRS, fair market value is the price a “willing, knowledgeable buyer would pay a willing, knowledgeable seller when neither has to buy or sell.”  

You are responsible for determining the fair market value of the items you are donating.  The charity to which you make the donation is not required to, and in most cases will not, provide you with a value.  See the Goodwill Industries valuation guide in this package or go online to www.satruck.org/donation-value-guide.  

Whenever you contribute used appliances, electronics, books, clothing, furniture or household items you should always make and keep a detailed listing of the items donated with the condition and value of each set of items (i.e. 6 pairs of men’s pants, good condition, $60.00, 5 pairs of men’s shoes, good condition, $75.00).  You should also get a receipt from the charity (unless you are putting clothes in a bin).  You may want to attach a copy of the listing and the receipt to your Form 1040.     

You cannot deduct the contribution of a used item of clothing or household item to a church or charity unless the item is in at least "good" condition (except for a single such item with a documented appraised value of more than $500).  Donations of clothing and household items with a minimal monetary value, such as used socks or underwear, are also not deductible.

When donating used clothes and household items to charity you should go with the “old reliables” like Goodwill Industries, the Salvation Army, Vietnam Veterans of America or your local church – this way you are sure to be giving your items to a legitimate charity. In many cases the charity will come to you to pick up your donations. And if you are putting your donations in a “drop-off box” make sure the name of the charity is clearly indicated on the box. While these boxes may be convenient it is “more better” to drop off your donation at a local Goodwill or Salvation Army store or donation center, where you can get a signed receipt.”

If you purchase new items to contribute to a food, toy or clothing you can deduct the actual cost of the items donated.  The same reporting and documentation requirements discussed above for used items will apply.  You should make a separate purchase of the items you will donate – do not group together with the purchase of items for your personal use – and save the store receipt. 

You must complete and attach to your Form 1040 IRS Form 8283 if you are deducting “non-cash” contributions totaling more than $500.00.  The following information will be needed –

• the name and address of the charity(ies) to whom you made the donation(s),

• the date of the contribution(s),

• the fair market value of the items donated, and

• how you determined the value – i.e. “Salvation Army valuation guide”

If any one individual item has a value of more than $500.00 you must also list

• the date you acquired the property

• how you acquired the property – i.e. purchase, gift, inheritance, exchange

• the cost or adjusted basis of the property

If the total amount of your monetary contribution, or the total value of items donated, to a charity in a single day is more than $250.00 you must have a written acknowledgement from the donee organization with the name and address of the charity, the date of the contribution, and a description of the items donated.  The acknowledgement must also indicate whether you were provided any goods or services by the charity in exchange for the donation.  In the cash of money donated to charity - this is in addition to the required documentation mentioned above (i.e. cancelled check or credit card receipt) – you must have both if the contribution is more than $250.00.

You can also deduct out-of-pocket expenses connected with donations or volunteer service to a qualifying organization, such as the cost of the ingredients of homemade cookies or a cake donated to a church bake sale, or the cost and laundering of uniforms for a scoutmaster, and travel and transportation expenses incurred while performing a volunteer service for a qualifying organization.  If you use your car you can deduct 14 cents per mile in lieu of actual expenses plus any parking fees and tolls.  It is a good idea to keep a log of your charitable travel.

FYI - you cannot deduct contributions made directly to an individual or family, regardless of the recipient’s financial situation or health status.

Any questions?

TTFN