Killen & Associates, CPAs, PA

Our cit­i­zens are known world­wide for their com­pas­sion and will­ing­ness to con­tribute to char­i­ta­ble causes. Our gen­eros­ity is not tied to the fact that our income tax sys­tem allows a deduc­tion for char­i­ta­ble giv­ing; how­ever, such a deduc­tion is avail­able for all char­i­ta­ble givers who item­ize their deduc­tions on their income tax return. For this rea­son, it is impor­tant for tax­pay­ers to under­stand the require­ments of claim­ing this benefit.

Because the fed­eral gov­ern­ment is con­cerned about abuses of the char­i­ta­ble deduc­tion, Congress has been tight­en­ing the rules for dona­tions of cash, cloth­ing, house­hold items, ease­ments, and other items. The lat­est and most strict require­ments come from the Pension Protection Act of 2006 with revised record keep­ing require­ments for tax­pay­ers claim­ing deduc­tions for the 2007 tax year and following.

The fol­low­ing infor­ma­tion should help you claim the max­i­mum char­i­ta­ble deduc­tion on your income tax return.

Cash

No deduc­tion will be allowed for any con­tri­bu­tion of cash, check or other mon­e­tary gift unless you can show bank record or writ­ten com­mu­ni­ca­tion from char­ity indi­cat­ing amount of con­tri­bu­tion, date con­tri­bu­tion was made and name of charity.

If you made a con­tri­bu­tion in the form of a deduc­tion from your pay check you should retain your pay stub, form W-2 or other doc­u­men­ta­tion pro­vided by your employer that shows the total amount with­held for your charity.

IRA Distributions

The trustee of your indi­vid­ual retire­ment arrange­ment (IRA), other than a SEP or SIMPLE IRA, can make a qual­i­fied char­i­ta­ble dis­tri­b­u­tion on your behalf directly to a char­i­ta­ble orga­ni­za­tion, if you have reached age 70½.  The dis­tri­b­u­tion is not tax­able, but you can­not claim a deduc­tion for the contribution.

Clothing and Household Items

No deduc­tion will be allowed for donated cloth­ing and house­hold items unless items are in good used con­di­tion or bet­ter.  The IRS does not define “good used condition”.

There is an excep­tion to the “good used con­di­tion” rule when you deduct more than $500 for an item and include a qual­i­fied appraisal of it with your tax return.

Household items include fur­ni­ture, fur­nish­ings, elec­tron­ics, appli­ances, linens and other sim­i­lar items, but not food, antiques, art­work, jew­elry and gems or collections.

Vehicles

If a donated car, truck, boat or air­craft is val­ued at more than $500, you can deduct the lesser of the gross pro­ceeds from the sale of the vehi­cle by the char­i­ta­ble orga­ni­za­tion or the vehicle’s fair mar­ket value when the dona­tion was made.  The char­i­ta­ble orga­ni­za­tion must pro­vide you with Form 1098-C (Contributions of Motor Vehicles, Boats and Airplanes) or a sub­sti­tute state­ment con­tain­ing the same infor­ma­tion within 30 days of the sale of the vehi­cle.  If the orga­ni­za­tion does not sell the vehi­cle, it must pro­vide Form 1098-C (or a sub­sti­tute) within 30 days of your donation.

If you donate a vehi­cle val­ued at $500 or less, you can deduct the lesser of $500 or the vehicle’s fair mar­ket value at the time of the dona­tion.  If the donated vehicle’s fair mar­ket value is at least $250, you must have a writ­ten state­ment from the char­i­ta­ble orga­ni­za­tion acknowl­edg­ing your donation.

Property Valued at More Than $5,000

If you claim a deduc­tion of over $5,000 for a sin­gle prop­erty item or group of sim­i­lar prop­erty items, you must have a writ­ten state­ment from the char­i­ta­ble orga­ni­za­tion acknowl­edg­ing your dona­tion.  Additionally, you must obtain a qual­i­fied appraisal from a qual­i­fied appraiser, which must be included with your tax return.

Appraisal Fees

Appraisal fees and other fees that you pay to deter­mine the fair mar­ket value of a donated item are not deductible as con­tri­bu­tions.  You can claim these fees as a mis­cel­la­neous item­ized deduc­tion sub­ject to the 2%-of-adjusted-gross-income limit.

Additional Information

The infor­ma­tion in this arti­cle is not inclu­sive and should not be used as an author­i­ta­tive source for tax advice.  If you would like to know more about deduc­tion rules for char­i­ta­ble con­tri­bu­tions and how to make the most of your char­i­ta­ble con­tri­bu­tions, you should con­tact your income tax professional.