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Step 1
Give money. This is the most common form of charitable contributions, and there is never a question of the value of the donation. Cash gifts of up to $250 require only a cancelled check as documentation. if you give more than this amount, you must have a contribution acknowledgement from the receiving organization which includes the date and amount of the contribution as well as a statement that the donor did not receive any goods or services in exchange for the contribution.
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Step 2
Donate non-cash items. Many people give clothing, household goods and other things they no longer need to qualified organizations like Goodwill or the Salvation Army. The IRS requires the items to be in "good" condition, but there is no clear definition of "good" in the IRS code. All non-cash donations require a receipt from the organization, and it is the taxpayer's responsibility to make a good faith estimate of the fair market value of the item(s) at the time of the donation.
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Step 3
Report non-cash donations with a total value of $500 or less directly on Schedule A (itemized deductions). Non-cash contributions of $501 or more must be reported on form 8283, and you must include the name and address of the organization, the original value of the item(s), the fair market value (FMV), the method used to determine fair market value and how you acquired the item(s). if the FMV is more than $5000, an appraisal by a qualified appraiser must accompany form 8283.
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Step 4
Make a donation of appreciated stock held for more than one year. This benefits a taxpayer in two ways. First, you don't have to pay capital gains tax on the gain in value, and, second, you get a contribution deduction for the full market value of the stocks at the date of the contribution.
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Step 5
Transfer a required minimum distribution (RMD) from an IRA account to a qualified organization if you are a senior aged 70 and one half or older and if Congress extends the provision beyond 2007. You would pay no tax on the RMD. This will be a smart way to avoid paying tax on income you don't need, but you won't be able to take a contribution deduction for it. Even if Congress extends the provision, the IRS won't allow a double benefit in this case.
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Step 6
Remember to claim any "out of pocket expenses" you pay for the benefit of a qualified organization. For example, if your church has a fund raising dinner and you buy food, paper goods or other items for the event, you can deduct the cost of these items. Be sure to keep your receipts or pay by check. If the total is $250 or less, that's all the documentation required. For larger amounts, get a contribution letter from the organization.
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Step 7
Keep track of any charitable travel expenses or mileage you drive for a nonprofit. For example, if you pay your own travel expenses on a church mission trip, transport your daughter's Campfire Girl troop on a field trip or deliver Meals on Wheels, you can deduct these costs with the proper documentation.
