|
|
|
MailTribune.com
  • Charitable donations

    Give what you can, but remember to take steps needed to claim tax benefits
  • WASHINGTON — If you've noticed a slightly more hysterical tone in the fund requests we all get from charities this time of year, there's a reason: Donors, hit by factors as varied as the Madoff scandal and the general economic downturn, have cut back while the charities are facing greater demand for their services.
    • email print
  • WASHINGTON — If you've noticed a slightly more hysterical tone in the fund requests we all get from charities this time of year, there's a reason: Donors, hit by factors as varied as the Madoff scandal and the general economic downturn, have cut back while the charities are facing greater demand for their services.
    This makes whatever donations you make this year more than usually welcome, but if you decide to give, be sure to take the steps necessary to qualify for the tax benefits.
    Giving to charity can be as simple as putting a dollar in a church collection plate or as complex as setting up a private foundation, and the tax requirements follow a similar pattern. The fancier you get, the more complicated it becomes.
    The threshold requirement for deducting charitable gifts is that you itemize your deductions on your tax return, rather than taking the standard deduction. This disqualifies many small donors because, unless you own a house and have taxes and maybe a mortgage to pay, your itemized deductions probably will be less than the standard deduction — $5,700 for single taxpayers and $11,400 for couples this year — so it will not make sense to itemize.
    A second basic requirement is that the recipient of your donation must be a genuine charity. Just because a group is nonprofit doesn't mean it's a charity to which donations are deductible. Legitimate charities will be glad to tell you, but if you are uncertain about a group, you can check the Internal Revenue Service's Publication 78, which is available online at www.irs.gov.
    Now, assuming you've passed those two hurdles, consider whether you intend to give cash or property.
    The rules for cash, which includes checks, credit or debit card payments and payroll deductions, depend on the amount.
    If you give less than $250, a canceled check, bank statement showing the transfer, or a credit card is sufficient evidence of your gift. If you don't have those, you should get a written receipt from the recipient. In cases where that's not practical, such as with money put into the collection plate at church, it's probably wise to make your gifts in the form of checks, especially if your donations are significant.
    Further, if you get something for your money, you must subtract the value of that from the amount you deduct. Thus, if you pay $50 to go to a charity dinner and the meal is worth $30, you may deduct only $20.
    However, for the purposes of the less-than-$250 rule, the IRS does allow you to treat each of a series of gifts separately. Thus, if you gave $10 every Sunday for 30 weeks, each would still be subject to the rules for gifts of less than $250.
    If you give a gift of $250 or more, you must get a written receipt, and the receipt must spell out the amount you gave and whether you received anything of more than token value for your gift. It should also show the date of the gift; if it doesn't, you'll need bank or other records that show when you gave it.
    Also, you must have this receipt in hand when you file your return — no going back and getting it later.
    The rules for gifts of property, which can include anything from used clothes to stocks and bonds to works of art, are more complicated, especially if you make a large donation.
    First, there is the question of items that have increased in value since you acquired them.
    If you have owned the item for less than a year, your deduction is limited to your "basis" in it, usually the purchase price. However, if you have owned the asset for a year or more, you may generally deduct its full market value.
    If you are taking a deduction of $250 or less for a non-cash gift, you must get a receipt that includes what the IRS calls a "reasonably detailed" description of the item. Used clothes and household items must be in "good" condition to be deducted.
    Deductions for non-cash items of $250 to $500 also require a similar receipt, but it must specify whether you received anything in return for the gift, and it must include a "good faith estimate" of anything you did receive.
    For gifts valued at $500 to $5,000, you have to file a separate form, known as Form 8283, with your return. And you must obtain a detailed receipt from the recipient and keep detailed records of your own on when and how you got the item you donated.
    If your total gifts for the year are less than 20 percent of your adjusted gross income, you don't need to worry. But if the total is more, it's a good idea to check with an accountant. These rules are very complex.
Reader Reaction
      • calendar