If you are thinking about giving to a charity, time is running out to give and still include the contribution on your 2009 tax return. All donations must be made by December 31 to be claimed on this year’s tax return when you file in early 2010.
Several important tax provisions have taken effect in the past few years, here are some of the notables to be aware of:
Special Charitable Contributions for Certain IRA Owners
This provision is set to expire at the end of 2009. Currently, it allows IRA owners who are age 70 1/2 or older to directly transfer up to $100,000 tax-free, to an eligible charity. This provision is available for distributions from IRAs, regardless of whether the IRA owner takes itemized deductions or not. It is important to mention this provision does not apply to employer-sponsored pension plans and SEPs (simplified employee pension plans). Amounts transferred are not taxable and no deduction is available for the transfer. Not all charities are eligible, so check Publication 590 for more information on eligible charities.
Rules for Clothing and Household Items
To donate clothing and/or household items to a charity, the items must be in good used condition or better. Any item a taxpayer is claiming a $500 or more deduction on does not have to meet this criterion, provided they have a qualified appraisal of the item attached to their tax return.
Guidelines for Monetary Donations
For all monetary donations, the taxpayer must have a bank record or a written communication from the charitable organization showing the name of the charity, date and amount of the contribution. Credit card statements, bank or credit union statements or copies of cancelled checks all count as bank records. If the donation is made through payroll deduction, a pay stub or W-2 should show the amount of the contribution.
Helpful Reminders from the IRS
- Contributions are deductible in the year made. If you charged a donation at the end of 2009, but are not going to pay your credit card bill until 2010, you may still claim the deduction in 2009.
- Only donations to qualified charities are allowable as tax deductions. If you are not sure about the status of the charity you want to support, check IRS Publication 78.
- For individuals, only taxpayers who itemize on Form 1040A can claim deductions for charitable contributions.
- For all donations of property, including household goods and clothing, make sure to get a receipt from the charity that includes the name of the charity, date of donation, and a reasonably detailed description of the donated property.
- 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.
- If the total of a taxpayer’s deduction for all non-cash contributions is over $500, a properly completed Form 8283 must be submitted with the 1040A.
Make sure to follow the IRS’ guidelines when deducting your charitable donations. For more information, refer to IRS Publication 526.
Posted by JK Harris & Company