Charitable Gift Taxes
It's better to give than to receive, but the IRS since 2007 has made that Biblical dictum a lot harder to claim on your taxes. The most stringent new regulation requires you to keep records of what you give, both monetary and non-monetary (clothes, furniture and equipment). And non-monetary items must truly reflect their fair market value.
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Good Condition
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Many people deduct charitable contributions of clothes or furniture to such places as Goodwill or the Salvation Army but, while still deductible, a change in the Pension Protection Act of 2006 added the requirement that the items contributed must be in "good" condition. Congress didn't define exactly what "good" means, but tax authorities urge donors to use common sense. The tax code uses the standard of "minimal monetary value." A tattered dress shirt is likely not deductible. Likewise, broken dishes, chairs suitable for little but firewood, or a broken computer from 1979 are not likely to be valid deductions.
Record Keeping
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Before 2007, the IRS allowed you to use check receipts, notes and even diaries to substantiate your claims of charitable donations. Now, the IRS accepts only three forms of proof that you made a donation and its dollar value. You can use bank receipts, a receipt from the charity itself and payroll deductions if you make contributions directly from your paycheck. In lieu of a payroll receipt, the IRS also accepts a pledge card or other employer-issued document that details the name of the charity, the date(s) of contributions and the amount of the donation(s).
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Big Ticket Items
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Even if an item passes the "good" condition test, any single contribution more than $500 must be appraised. The appraisal should include such things as the date acquired, date appraised, your cost and the fair market value. Cars and boats, jewelry, art and other valuables must meet the same test to be claimed.
Mileage
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Mileage is one commonly overlooked deduction. If you deliver food to the elderly, the poor or others in need for a church or other non-profit, keep a record of how far you drive because the mileage is deductible as a charitable contribution. In 2008, you could claim 14 cents per mile, but the IRS mileage deduction rate can vary year-to-year, so check with your tax adviser on the applicable amount for the year you're filing.
Give a Gift
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You can reduce your tax liability by contributing money to charitable organizations and using the contributions as a deduction. Under the Economic Growth and Tax Relief Reconciliation Act of 2001, you can donate up to $13,000 a year. As always, make sure to receive the acceptable documentation.
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References
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