IRS Requirements for Charitable Contributions

Charitable contributions, whether it be cash or property, are usually deductible subject to certain limits. Political contributions are not deductible.   Below are some basic rules regarding the deductibility of charitable contributions.  For more detailed information read IRS Publication 526.  There have been some changes to since the publication date so be sure to read the new rules below which supersede some party of the publication.

New Recordkeeping Requirements

If a donation is $250 or more you will need an acknowledgement from the organization. Prior law allowed taxpayers to back up their donations of money with personal bank registers, diaries or notes made around the time of the donation. Those types of records are no longer sufficient.

If the donation is less than $250 you will need one of the following:

• A cancelled check

• A receipt from the organization showing date and amount of contribution

• Credit card statement showing the name of the charity and transaction posting date

• Bank statements should show the name of the charity and the date and amount paid

New Rules for Clothing and Household Items

To be deductible, clothing and household items donated to charity after Aug. 17, 2006, must be in good used condition or better. However, a taxpayer may claim a deduction of more than $500 for any single item, regardless of its condition, if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances, and linens.

The IRS offers the following additional reminders

Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the year count for 2006. This is true even if the credit-card bill isn’t paid until next year. Also, checks count for 2006 as long as they are mailed this year.

Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. Follow this link to check whether or not an organization is a qualified organization:  http://apps.irs.gov/app/pub78  IIn addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even though they often are not listed online.

For individuals, only taxpayers who itemize their deductions on Schedule A can claim a deduction for charitable contributions. This deduction is not available to people who choose the standard deduction, including anyone who files a short form (1040A or 1040EZ)A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceeds the standard deduction.

For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes a description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes a description of the property and its condition.

The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value of the vehicle is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return. See IRS Publication 526, Charitable Contributions, for more information.