SOME YEAR-END REMINDERS ABOUT CHARITABLE CONTRIBUTIONS While trying to decide what final charitable contributions to make before the end of year, the following tax-related reminders might be helpful: Current guidelines for donations of money. A charitable donation of money, is only deductible if you have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. The written substantiation requirements for donations of money apply regardless of the amount contributed. Donations of money include those made in cash or by check, electronic funds transfer, credit card, or payroll deduction. Canceled checks, bank or credit union statements, and credit card statements are good bank records to substantiate a donation. Bank, credit union or credit card statements should show the name of the charity, and the date paid or posted and amount of the donation. Donations charged to a credit card are deductible in the year charged, even if the bill is not paid until the following year. If a charitable donation is made by payroll deduction, 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. The recent requirement that all monetary donations be supported by written substantiation does not change the long-standing requirement that a taxpayer obtain a written 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 the requirements of both provisions. Current rules for clothing and household items. In general, clothing and household items that are donated to charity must be in good used condition or better for the donation to be deductible. Donation of such an item that is over $500 does not have to be in good used condition or better if you include a qualified appraisal of the item with your income tax return. ("Household items" include furniture, furnishings, electronics, appliances, and linens.) Special Individual Retirement Accounts Rule. A person who is age 70 ? or older can directly transfer, tax-free, up to $100,000 per year of his or her Individual Retirement Account (IRA) to an eligible charitable organization. This special IRA donation option was created in 2006 and recently extended through 2009. An IRA, or portion of an IRA, transferred to a charity under this rule is not limited to the general charitable contribution percentage limit. The amount of the IRA transferred is not even included in the donor's gross income. As an added benefit, the amount transferred does count toward the donor's required minimum distribution for the year of the donation. For example, if the IRA owner is required to take a minimum distribution of $75,000 this year and has not yet done so, making a $100,000 transfer to charity will satisfy this requirement. The benefits of this special rule are available regardless of whether the eligible IRA owner itemizes his or her deductions. Note that distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible for these tax free transfers. Only IRAs are eligible for these tax free transfers. To qualify for this tax benefit, the funds being transferred must be contributed directly by the IRA trustee to the eligible charity. Not all charities are eligible recipients. For example, donor-advised funds and supporting organizations are not eligible recipients. Other charitable giving reminders. Contributions are deductible in the year made. Only donations to qualified organizations are tax-deductible. If you have any concern that an organization may not be qualified, ask for confirmation. Also, different income tax deduction limits apply depending on the type of charitable gift (for example, cash vs. fine art) and the type of recipient organization (for example, public charity vs. private foundation).
All charitable donations need to be substantiated, one way or another. Therefore, it is always advisable to get a written acknowledgement from the charity that reflects the date of the gift, the amount of the gift, a description of the property given and a statement that the donations are tax deductible.
For individuals, only taxpayers who itemize deductions on their income tax returns (Schedule A) can claim deductions for charitable contributions. The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale by the charity or the charity's representative. This rule applies if the claimed value of the vehicle is more than $500. A special form (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 your deduction for all noncash contributions will be over $500, a properly completed IRS Form 8283 must be submitted with your income tax return. As you might expect, there are other rules that apply to specific types of gifts. If you have questions about the charitable gifting rules we have discussed in this newsletter or about the rules that apply to a specific donation you are contemplating, please contact Melissa Busley, member of the Dunn Carney tax team. ____________________________________________________
Circular 230 Disclosure: IRS regulations require us to advise you that, unless otherwise specifically noted, any federal tax advice in this communication was not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of avoiding penalties; furthermore, this communication was not intended or written to support the promotion or marketing of any of the transactions or matters it addresses. | 
