Tax advice for year-end charity contributions

(12/23/2011) Erate Exclusive - Unless you get a receipt, the money you drop in a bell-ringer's pot outside a retail store isn't tax deductible.

The Internal Revenue Service says when you make contributions to charity you must follow tax law provisions that dictate how you can take a tax deduction on your federal tax return.

Charitable contributions for IRA owners

A special tax provision set to expire at the end of 2011, offers IRA (Individual Retirement Account)

Created in 2006, the option is available for distributions from IRAs, even if you don't itemize your deductions. Distributions from employer-sponsored retirement plans, including SIMPLE (Savings Incentive Match Plan for Employees) IRAs and simplified employee pension (SEP) plans, are not eligible.

To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Transferred amounts are not taxable, but you cannot take a deduction for this type of contribution.

Not all charities are eligible for IRA distribution contributions. For example, donor-advised funds and supporting organizations are not eligible recipients.

IRS Publication 590, Individual Retirement Arrangements (IRAs) offers more information and a tax professional can help.

Rules for donating clothing and household Items

To be deductible, clothing and household items donated to charity must be in good used condition or better. Household items include furniture, furnishings, electronics, appliances and linens.

A clothing or household item for which you claim a deduction of over $500 does not have to meet this standard if you include a qualified appraisal of the item with your tax return.

You should obtain a receipt or other documentation stating the value of the donation for all donations listed as a deduction on your return for your records and in case you are audited.

Guidelines for monetary donations

If you want to deduct a charitable donation of cash you must have a bank record or written communication from the charity showing the name of the charity and the date and amount of the contribution.

Bank records include canceled checks, bank or credit union statements, 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 can include donations 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.

You must also obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. One statement containing all of the required information may meet both the charity's acknowledgement requirement and bank record or written communication requirement.

Contribution reminders

• Charitable contributions are deductible only in the year they are made. Donations charged to a credit card before the end of 2011 are deductible for 2011, even if the credit card bill isn't paid until 2012. Likewise, checks for contributions mailed in 2011 are deductible for 2011.

• Only donations to qualified organizations are tax-deductible. Search IRS Publication 78 at under "Search for Charities" to find qualified organizations. Churches, synagogues, temples, mosques and government agencies are also eligible to receive deductible donations, even if they are not listed in Publication 78, provided you follow IRS's documentation requirements.

• You can claim deductions for charitable contributions only if you itemize your deduction on Form 1040 Schedule A. Also, you will only have a tax savings if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction.

• If you donate a motor vehicle, boat or airplane, the deduction is typically limited to the gross proceeds from its sale if the claimed value is more than $500. You must obtain IRS Form 1098-C, or a similar statement, from the organization and attach it to your return.

• If the amount of your deduction for all non-cash contributions is more than $500, you must complete IRS Form 8283 and submit it with your tax return.

Additional related tax information is available from IRS Publication 526, Charitable Contributions and the online mini-course "Can I Deduct My Charitable Contributions?"

All IRS forms and publications are available online.

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