TaxServices ― The Internal Revenue Service today reminded individuals and
businesses making year-end gifts to charity that several important tax law
provisions have taken effect in recent years. Some of the changes taxpayers
should keep in mind include:
Rules
for Charitable Contributions of Clothing and Household Items
Household
items include furniture, furnishings, electronics, appliances and linens.
Clothing and household items donated to charity generally must be in good used
condition or better to be tax-deductible. 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.
Donors
must get a written acknowledgement from the charity for all gifts worth $250 or
more. It must include, among other things, a description of the items
contributed.
Guidelines
for Monetary Donations
A
taxpayer must have a bank record or a written statement from the charity in
order to deduct any donation of money, regardless of amount. The record must
show the name of the charity and the date and amount of the contribution. Bank
records include canceled checks, and bank, credit union 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
The IRS
offers the following additional reminders to help taxpayers plan their holiday
and year-end gifts to charity:
Qualified
charities. Check that the charity is eligible. Only donations to eligible
organizations are tax-deductible. Select Check, a searchable online tool
available on IRS.gov, lists most organizations that are eligible to receive
deductible contributions. In addition, churches, synagogues, temples, mosques
and government agencies are eligible to receive deductible donations. That is
true even if they are not listed in the tool’s database.
Year-end
gifts. Contributions are deductible in the year made. Thus, donations charged
to a credit card before the end of 2014 count for 2014, even if the credit card
bill isn’t paid until 2015. Also, checks count for 2014 as long as they are
mailed in 2014.
Itemize
deductions. 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.
This includes 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 the 2014 Form 1040 Schedule A to determine whether
itemizing is better than claiming the standard deduction.
Record
donations. For all donations of property, including clothing and household
items, get from the charity, if possible, 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.
Special
Rules. The deduction for a car, 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.
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