FOR IMMEDIATE RELEASE: January 21, 2008

TAX-DEDUCTIBLE DONATIONS: WHAT YOU NEED TO KNOW

Americans donated an estimated $295 billion to different charities in 2006, a new record, according to “Giving USA 2007,” a report from the Giving USA Foundation. Our generosity allows us to make a difference to a wide range of worthy causes.

There’s a reward for this generosity, too, because it also qualifies you to take tax deductions for your donations. Recent changes in the tax law have made a difference on which deductions you are allowed to claim, however, advises the New York State Society of CPAs.

GET IT IN WRITING

First, you should be aware that you can only claim a charitable donation if you itemize on your tax return. In general, you are allowed to deduct your contributions of cash, checks or other monetary gifts to a qualified tax-exempt organization, such as a house of worship or charity. In the past, it might have been acceptable to keep personal notes showing that you had dropped some cash in the collection plate. Under the new rules, when you donate cash, you will need documentation.

If you give money, your documentation can be a cancelled check or a bank, credit union or credit card statement showing the donation. If you give monetary gifts, you will need a written record of what you gave. No matter what you give, a bank record or a receipt from the charity must include the organization’s name, the amount of the contribution and the date of the donation. If you donate through a payroll deduction, you will need a pay stub, Form W-2 wage statement or some other documentation from your company showing how much was withheld, along with a pledge card that gives the name of the charity. Without these records, you won’t qualify for a deduction.

TAKE PICTURES

We all know that any non-monetary items donated to a charity should be in good, useable condition, but the Internal Revenue Service now requires that taxpayers prove that they are. This applies to all clothing and household items, which the IRS defines as furniture, furnishings, electronics, appliances, etc.

If you donate something now and you are questioned about its condition a year later, it will be difficult to establish that it was in good condition. As a result, CPAs advise that you photograph your donated items and make notes about their condition.

CONFIRM THE VALUE

In some cases, a receipt from a charity may not be sufficient to get your deduction. If you claim more than a $5,000 income tax deduction for items other than readily valued property, the property must be appraised.

CHECK THE GROUP’S QUALIFICATIONS

You can only deduct donations made to groups that the IRS considers to be “qualified.” In general, that means that the group is a religious, charitable, educational or other philanthropic organization approved by the IRS to receive deductible contributions.

If you want advice on charitable giving, your CPA can help you understand the guidelines.

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Produced in cooperation with the AICPA
©2007 The American Institute of Certified Public Accountants
PUBLIC SERVICE ANNOUNCEMENT
NEW RULES ON CHARITABLE DONATIONS
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Helping a good cause is a reward in itself, but it’s also gratifying to get a tax benefit for our contribution. But when you give to a charity, you should be aware of changes in the tax law that have recently been enacted, advises the New York State Society of CPAs.

In general, you are allowed to deduct the value of your donations to a qualified tax-exempt organization, such as a religious, charitable, educational or other philanthropic organization approved by the IRS to receive deductible contributions. Under the new rules, if you donate clothing or household items, the property must be in good condition or better. If you give monetary gifts, your documentation can be a bank, credit union or credit card statement, cancelled check or a written receipt from the charity showing the donation amount and date. If you give clothing or a household item, you will need something in writing from the charity confirming the organization’s name, what you have donated and the date of the donation. Without these records, you won’t qualify for a deduction for your donation.

Need help understanding the new rules? Your CPA can provide advice on the best way to be sure you qualify to take the deductions for your donations.