The holiday season is often a time for charitable gift giving. Here is a list of tax rules to follow to ensure your charitable deduction is respected by the IRS:
- Qualified Charities. You can only deduct gifts to qualified charities. Use the IRS Select Check tool (http://apps.irs.gov/app/eos/) to see if the charity you give to is qualified. Remember that you can deduct donations you give to religious organizations and government agencies even if IRS Select Check does not list them in its database.
- Monetary Donations. Gifts of money include those made in cash or by check, electronic funds transfer, credit card, and payroll deduction. You must have a bank record or a written statement from the charity to deduct a gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union, and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement, or other document from your employer. It must show the total amount withheld for the charity, along with the pledge card showing the name of the charity.
- Household Goods. Household items include furniture, furnishings, electronics, appliances and linens. If you donate clothing and household items to charity they generally must be in at least good used condition to claim a tax deduction. If the amount claimed on your tax return with respect to such items exceeds $5,000, a qualified appraisal must be obtained. If you want to claim a deduction for a item that is “not in good condition,” the appraisal threshold is lowered to $500 for the donation.
- Records Required. You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. The acknowledgement must contain a statement that the charity did not provide any goods or services to you in connection with the gift, or state the value of any goods or services actually provided. This statement is in addition to the records required for deducting cash gifts, outlined above in paragraph 2.
- Year-End Gifts. You must deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2014. This is true even if you don’t pay the credit card bill until 2015. Also, a check will count for 2014 as long as you mail it in 2014.
- Special Rules for Vehicles. Special rules apply if you donate a car, boat or airplane to charity. If you are considering gifting a vehicle, you should contact an attorney for advice.
Note that this discussion highlights certain key tips, and does not include all issues to be considered when making gifts to charity.