Be a Smart Giver

Even in tough economic
times, it makes sense to give money to your favorite charitable
organizations. First, it’s the right thing to do: many laudable
projects would simply not exist without the so-called “small
change” of the average donor.

Second, you may be able to get some of that donation back in
your pocket. With a little forethought and planning, you can ensure
that your donation helps those in need, and helps your tax bill as
well.

First, of course, you need to make sure that the organization
you’re planning to donate to is indeed qualified to receive your
money in the eyes of the IRS. To check out any purported charitable
organization, you can start by simply asking for their IRS
documentation for non-profit organizations. They should be able to
show you a copy of their IRS certification, such as a 501(c)(3) or
a similar designation. If you intend to claim your donation on your
taxes, verbal assurances alone may not be enough if you don’t know
the organization personally. There are a lot of groups posing as
charitable organizations that do not have the proper designation
from the IRS.

You can also go here to download Publication 78, the IRS’ list
of qualifying charitable organizations for the entire U.S. Note,
however, this is a BIG file and may not display correctly,
especially if you have an older computer.

Another good reason to research before you give is that many
non-profit groups had that status revoked by the IRS this year.
Some 275,000 organizations lost their tax-free status because they
didn’t file their required annual reports, and yearly audits could
mean more groups could join them in the coming years. So those
folks who promise that you can take your donation off your taxes
may not have the latest information. The IRS has the complete list
of groups that lost their non-profit status this year in this document. You can download the list by
state.

Once you’ve picked where your donation will go, you have some
more personal choices to make, not the least of them is whether
you’ll itemize your deductions. You can only deduct your charitable
contributions if you itemize, using Form 1040, Schedule A. And only
those contributions actually paid out during the tax year you’re
filing will count.

In general, you can deduct your cash contributions and the fair
market value of most property you donate to a qualified
organization. But be mindful that special rules apply to donations
of clothing, household items, cars and boats.

If the charity gives something in return for your donation –
let’s say, tickets to a baseball game, for example – you can only
deduct the amount of your contribution that exceeds the fair market
value of the item or service received.

We can’t stress enough the importance of keeping good records
when it comes to taxes, but especially when charitable
contributions are involved. For small donations – under $250 – a
bank or credit card statement is sufficient. But if you give more
than $250 to an organization, you’ll need a written acknowledgement
from them that includes how much money you gave, and whether any
material incentive or premium (like those baseball tickets) was
involved. If you donated property, the acknowledgement should
include a description of the items and a good-faith estimate of
their value.

If you donate items worth $500 or more, you’ll need to complete
Form 8283, Noncash Charitable Contributions, and attach it to your
return. If the property is worth more than $5,000 you generally
must get the property appraised and complete Section B of Form 8283
with your return.

If you’re not sure how much your potentially donated property is
worth, check out IRS Publication 561, Determining the Value of
Donated Property. It may not help you get more at the next church
rummage sale, but it might put more coins in your pocket when you
get your refund from the IRS.

And that’s a gift that keeps on giving.