Please note the information below is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of the information provided below should not be acted upon without specific professional guidance. Please call us if you have any questions.
With the holiday season upon us, many of you give generously to your favorite charities and we applaud your efforts. However, to ensure that your donations are tax deductible, there are a number of important points to keep in mind.
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 worth over $500 does not have to meet this standard if you include a qualified appraisal of the item with your return.
To be deductible, you must generally get a receipt from the charity showing the date and place of the contribution and a description of the property. However, for gifts under $250, if it is impractical to obtain a receipt (e.g., goods are delivered to an unattended drop site) a receipt is not required if you have written records with the same information as required for gifts over $500 (as described below).
If the gift is worth $250 or more, you must get a written acknowledgement from the charity that includes a description of what was donated and when, and a statement either that no goods or services were rendered in return for the donation or describing and valuing what the charity provided in return. The acknowledgment must be obtained by the time the tax return for the year of the donation is filed or due, whichever comes first.
If the amount of your deduction for all similar noncash contributions (such as clothing, jewelry, furniture, electronic equipment, household appliances) is over $500, you must keep written records that (1) indicate the appropriate date each noncash item was acquired, (2) include a reasonably detailed description of the donated property along with its condition, (3) estimate the purchase price of the item, (4) describe its current retail (usually second-hand or thrift-store) value, and (5) explain how this value was determined (e.g., from the Salvation Army’s online donation guide: http://satruck.org/donation-value-guide). If the amount of your deduction for all similar noncash contributions is over $5,000, you’ll generally need to have the items appraised by a qualified appraiser.
Guidelines for Monetary Donations
You must have a bank record or a written statement from the charity 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, you should retain a pay stub, a Form W-2 wage statement or other document furnished by your employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
These requirements do not change the long-standing requirement that you must 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.
Other Important Reminders
Other important reminders to keep in mind while planning your holiday and year-end charitable giving include the following:
- Qualified Charities. It is important to check to see if the charity is eligible to receive tax-deductible donations. “Select Check,” a searchable online tool available on IRS.gov, lists most such eligible organizations. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, 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.
- Special Rules for Cars Boats, and Airplanes. 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. The organization must give you Form 1098-C or a similar statement that you can attached to your tax return.
Please give us a call if you have any questions or need further information,