Year End Charitable Giving
(KTVI) – Charitable donations are an excellent way to reduce your tax burden for the year, all while doing something for the greater good. But as with everything in tax law, there are procedures and rules that must be followed. Bob Wamhoff, President of Wamhoff Financial Planning and Accounting Services, offers tips for making sure that you get the best bang for your holiday buck:
1) Only donations to qualified charitable organizations are deductible. If you are not sure whether an organization is qualified, ask to see their letter from the IRS (many post their letter on their website). Church, synagogues, temples, and mosques are considered de facto and are eligible to receive deductible donations even if they are not on the list.
2) Cash donations, regardless of the amount, MUST be substantiated by a bank record (such as a canceled check, credit card receipt) or in writing from the organization. Including in the writing: date, amount and the organization that received the donation.
3) Cash donations that do not have substantiation, such as cash without a receipt, are disallowed. Also donations made to an individual are not deductible.
4) For paycheck withholdings for a charity, please remember to keep your year-end paystub, Form W-2, or other documentation furnished by your employer. Also, keep the pledge card showing the name of the organization.
5) For non-cash donations, the rule is that you can generally take the FMV of the items. Be specific when you document the donated items. Pictures are worth a thousand words. Take pictures before your box up the items. Also the IRS states it must be in good used condition or better.
6) The rules for the donation of a car, truck, other motor vehicle, boat or airplane are a little different. Rather than use the fair market value of the donation, you are generally limited to the gross proceeds from its sale if the value of the item is more than $500. You will need to get a form 1098-C, or a similar statement, from the charitable organization and attach it to your tax return.
Contributions are deductible in the year made so be sure and get those gifts in by December 31. And yes, that means that credit card charges made before the end of the year are deductible even if the credit card bill isn’t paid until the next year. Similarly, checks which are written and mailed by the end of the year will be deductible for this year even if they aren’t cashed until 2012.