Yesterday, the IRS offered a few tax tips for taxpayers making year-end charitable donations. These include:
- Special Charitable Contributions for Certain IRA Owners;
- Rules for Clothing and Household Items;
- Guidelines for Monetary Donations; and
- Reminders.
Special Charitable Contributions for Certain IRA Owners. IRA owners over the age of 70.5 can transfer up-to $100,000 directly to an eligible charity. This option is available whether or not the taxpayer itemizes his deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible, however. Additionally, not all charities are eligible recipients. Your tax adviser can assist you in determining whether particular transfers and charities meet the necessary requirements.
Rules for Clothing and Household Items. To be deductible, clothing and household items donated to charity must be in good used condition or better. A clothing or household item valued at over $500 does not need to meet this standard, however, if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronic, appliances, and linens.
Guidelines for Monetary Donations. To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a 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 statements, and credit card statements. All bank records should show the name of the charity, the date, and the amount paid or the transaction posting date, as applicable.
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, and any pledge card showing the name of the charity.
These requirements are in addition to the other requirements relating to charitable donations, including the requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation of at least $250.
Reminders. The IRS published a few additional reminders:
- Contributions are deductible in the year made (or the year in which the credit card charge occurs).
- Verify that the organization is qualified.
- Individuals may only claim a charitable deduction if they itemize their deductions. Your tax adviser can help you determine if you should itemize your deductions or take the standard deduction.
- Where possible, get a receipt from the charity showing the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If the property is left at an unattended drop site or you do not receive a receipt, keep a detailed recorded that includes the items listed above.
- The deduction for a motor vehicle, boat, or airplane donated to charity is usually limited to the gross proceeds from its sale.
- If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.
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