Tips for Year-End Giving

2011 is coming to an end but it’s not
too late to make charitable contributions. Individuals and
businesses making contributions to charity should keep in mind
several important tax law provisions that have taken effect in
recent years. Some of these changes include the following:

Special Charitable Contributions for Certain IRA Owners

This provision, currently scheduled to expire at the end of
2011, offers older owners of IRAs a different way to give to
charity. An IRA owner, age 70½ or over, can directly transfer
tax-free up to $100,000 per year to an eligible charity. This
option, created in 2006, is available for distributions from IRAs,
regardless of whether the owners itemize their deductions.
Distributions from employer-sponsored retirement plans, including
SIMPLE IRAs and SEP plans, are not eligible.

To qualify, the funds must be contributed directly by the IRA
trustee to the eligible charity. Amounts transferred are not
taxable and no deduction is available for the transfer.

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

Amounts transferred to a charity from an IRA are counted in
determining whether the owner has met the IRA’s required minimum
distribution. Where individuals have made nondeductible
contributions to their traditional IRAs, a special rule treats
transferred amounts as coming first from taxable funds, instead of
proportionately from taxable and nontaxable funds, as would be the
case with regular distributions. See Publication 590, Individual Retirement
Arrangements (IRAs), for more information on qualified charitable distributions.

Rules for Clothing and Household Items

To be deductible, clothing and household items donated to
charity generally must be in good used condition or better. A
clothing or household item for which a taxpayer claims a deduction
of over $500 does not have to meet this standard if the taxpayer
includes a qualified appraisal of the item with the return.
Household items include furniture, furnishings, electronics,
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 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 include those 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.

These requirements for the deduction of monetary donations do
not change the long-standing requirement that a taxpayer obtain an
acknowledgment from a charity for each deductible donation (either
money or property) of $250 or more. However, one statement
containing all of the required information may meet both
requirements.

Reminders

To assist taxpayers in planning their year-end giving, here are
additional reminders:

• Contributions are deductible in the year made. Therefore,
  donations charged to a credit card before the end of 2011 count for
  2011. This is true even if the credit card bill isn’t paid until
  2012. Also, checks count for 2011 as long as they are mailed in
  2011.
• Check that the organization is qualified. Only donations to
  qualified organizations are tax-deductible. IRS Publication 78 lists most organizations that
  are qualified to receive deductible contributions. In addition,
  churches, synagogues, temples, mosques and government agencies are
  eligible to receive deductible donations, even if they are not
  listed in Publication 78.
• For individuals, only taxpayers who itemize their deductions on
  Form 1040 Schedule A can claim deductions for charitable
  contributions. This deduction is not available to individuals who
  choose the standard deduction, including anyone who files a short
  form (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.) exceed the
  standard deduction. Use 1040.com’s deduction calculator to determine whether
  itemizing is better than claiming the standard deduction.
• For all donations of property, including clothing and household
  items, get from the charity a receipt that includes the name of the
  charity, date of the contribution, and a reasonably-detailed
  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 this information, as well as the fair market
  value of the property at the time of the donation and the method
  used to determine that value. Additional rules apply for a
  contribution of $250 or more.
• 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 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.
• 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.
• And, as always it’s important to keep good records and
  receipts.

Click here for more information on charitable
contributions.