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2013 1231 Charitable Contributions – No IRS Wiggle Room
Posted By Joseph S. Reisman On January 31, 2013 @ 1:00 pm In News & Features | No Comments
Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.
If you enjoyed playing a game as a child of jumping through hoops, you’ll really enjoy the rules to claim a charitable contribution on your tax return. In this area, unlike others in the tax code, the rules have been etched into law with no wiggle room.
The first thing you should do is verify that the charity is an authorized exempt organization. Go to www.IRS.gov, and type “Pub. 78 data” into the search box.
Under $250 (Cash):
Under audit, you need:
Over $250 (Cash):
At the time of the gift, the charity must give you a receipt, stating:
If you want to deduct non-cash items as charity, you need to follow these rules. You can deduct the “fair market value” of those items you donate. The fair market value, per the IRS, is the price a “willing, knowledgeable buyer would pay a willing, knowledgeable seller when neither has to buy or sell.”
You, not the charity, have to determine the value. One source is the Salvation Army valuation guide.
Under $250 (Non-Cash):
You need a receipt showing:
I don’t suggest using those clothing ‘drop’ boxes.
Over $250 (Non-Cash):
In addition to the requirements above, the receipt must also state whether you were given any goods or services in exchange for the donation.
If the receipt does have the above requirements, it is no good for tax purposes.
Over $500 (Non-Cash):
If those boxes of clothing, for example, exceed $500, you (or your tax prepare) will have to complete the IRS form 8283, which shows:
In addition, if any one item is valued at over $500, you have to indicate:
Over $5,000 (Non-Cash):
If the item is valued at over $5,000, you’ll need a written appraisal. (Discuss this with you preparer.)
Whatever you donate – appliances, electronics, books, clothes, household items – make a detailed listing, and a value. For example, four (4) pairs of men’s shoes, good condition, $30; seven (7) skirts, good conditions, $21. Along with the list, take a photo to prove the condition of the items. The law says that the items must be in “good condition.”
New Items for a charity drive are deductible at their cost. Again, save the receipts. Make sure that you are donating to a charity. Giving a coat to a homeless person is not deductible, neither is food or anything else you give to your neighbor whose house burned down. Go through a recognized charity.
Your car deduction is dependent on what the charity does with it.
The charity will provide you the value, if over $500, on an IRS form, 1098-C, or give you a statement within 30 days of what the charity did with the car.
Out Of Pocket Deductions:
Note that contributing through payroll deduction does not exempt you from following these rules.
Remember that the value of the contribution dollar-wise is your tax bracket. So if you are in the 15 percent bracket, a $100 contribution is worth $15 in your pocket. Maybe items are worth more on eBay?
Have a good week.
Quip: A penny saved is a government oversight.
Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.
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