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Charitable Gifts – Still Deductible, But You Must Have Proof

Posted by taxguru on February 13, 2008

Courtesy of the most recent email bulletin from ACAT.

If you are like most Americans, you make donations throughout the year.  Your schools, religious groups, museums, Salvation Army, Cancer Fund and many more non-profit organizations benefit from your giving.


The U.S. Congress recognizes the benefits of your generosity and has steadfastly maintained deductions on your federal income tax for charitable giving.  But this doesn’t mean that there aren’t regulations to be followed.  And the rules have gotten stricter for reporting charitable gifts on your 2007 tax return.


Donations of Cash

The good news: You are still permitted to take substantial tax write-offs for charitable contributions – as high as 50 percent of your adjusted gross income.


The old news: Charitable contributions of $250 or more require a specific written acknowledgment from the charity. 


The new (stricter) news: Any out-of-pocket cash donations you make without documentation cannot be deducted. No longer can you deduct cash dropped in the collection plate at church or synagogue.


The solution: Get a receipt for all donations.


All donations must be documented by a bank record (cancelled check or bank statement) or a written communication from the charity.  The documentation must include the name of the charity, the date of the contribution, and the amount of the contribution.


For contributions of $250 or more, you can deduct the contribution only if you have an acknowledgment of your contribution from the charity.  A bank record is not sufficient documentation for a donation of $250 or more.


Donations of Clothing and Household Goods

The good news: These donations are still deductible.


The hard to understand rules:  Experts are still working on how to interpret the language which reads, “to be deductible, clothing and household items donated to charity after August 17, 2006, must be in good, used condition or better.”  How does a taxpayer document the condition of used items?    One option: Consider taking photos.


The documentation required for deduction of a non-cash donation varies with the amount of the deduction.  If the deduction is less than $250, only a receipt from the charitable organization is required.  For a deduction of $250 or more, a written acknowledgment from the charity is needed.  If the deduction exceeds $500, detailed information on the items donated must be reported on your tax return.  For donations exceeding $5,000 in value, a qualified appraisal is required to support the valuation.  Recommendation:  For all non-cash contributions, keep an itemized detailed inventory of what you donate including cost, date bought, condition and current value.  Consider an appraisal or other means of documenting the value of expensive items that you plan to donate to charity.


In all cases: Consult your tax advisor for help with your specific situation.


This information is provided as a public service, and should not be construed as individual accounting or tax planning advice.  For information on how these general principles apply to your situation, please consult an accounting or tax professional.


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