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Property tax time for all!

IRS serious about donation rules

Community chest monopoly Many folks make the most of the season of giving to direct some of their gifts to the less fortunate. Such goodwill provides the donor a twofer: the joy of sharing and a potential tax deduction.

That's quite fine by Uncle Sam, as long as you follow his contribution rules. And he's not kidding about those guidelines. Ignore or violate them, and you'll lose your tax break.

This is the second tax year in which the IRS' requirement that donated clothing or household items  be in good or better shape. I know none of you use charitable drop-off boxes as de facto trash cans, but some folks do (or did) try to deduct way too much for the threadbare T-shirts they unloaded on Goodwill, the Salvation Army or even their church collection bin. That's part of the reason the new law was enacted.

A good rule of thumb is to use the thrift shop guide. Is your item something that a person would pay for if it were on a second-hand store's shelves? And what is the price tag normally associated with such an article?

Many gifts, many rules: Just as there are many ways to give, the IRS has many different rules.

Regardless of the amount, any cash donation, and under IRS definitions this includes gifts charged to your credit card, must be substantiated by a bank or card statement or a written acknowledgment from the charity. Those documents need to show the name of the charity, the date of the gift and the amount. Acceptable bank records include canceled checks or bank or credit union statements.

If your monetary gift is $250 or more, you must have an official written receipt or acknowledgment from the qualified organization.

When you donate items valued more than $500, you must complete Form 8283, Noncash Charitable Contributions.

Very expensive gifts, those worth more than $5,000, also require a qualified appraiser's valuation and you must complete another section on Form 8283. And no, the fee you pay the appraiser is not deductible.

Vehicle requirements have added rules: Car contributions have their own set of somewhat complicated rules before you can determine just how much you can deduct.

Much like the household goods, folks were dropping off complete junkers at nonprofit organizations and claiming thousands of dollars on their tax returns. Now, instead of just using the actual value of your old car as your deduction amount, in most instances you can only deduct the amount of money the charity gets for the car at auction. The group should send you notice of that amount when the vehicle is sold.

If, however, the charity decides to use your donated vehicle for charitable purposes, it must tell you that. Then you can deduct the vehicle's fair-market value, easily obtained from sources such as Kelley Blue Book.

Yes, there are more hoops to jump through now when you want a tax break for a good deed. But it definitely could be worth it when you file your return.

But you don't really mind the extra work, do you? You are just giving because it's a good thing to do and the tax breaks is simply a nice added benefit.

Added break for Midwest disaster donations: This year, there are some new donation rules if you make cash contributions to qualified disaster relief efforts benefiting Midwest disaster victims.

The recently enacted Heartland Disaster Tax Relief Act suspends the percentage-of-income limits that normally apply to deductions.

In most cases, a taxpayer can only deduct gifts that come to up to 50 percent of his or her adjusted gross income (AGI). But under the new law, taxpayers can deduct some qualifying cash contributions up to 100 percent AGI.

More on this option can be found in this IRS announcement.


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 online auto donation

One provision offers older owners of individual retirement arrangements (IRAs) a different way to give to charity. There are also rules designed to provide both taxpayers and the government greater certainty in determining what may be deducted as a charitable contribution.


Patrick, thanks for catching that limit error regarding contributions of more than $500. My very bad! I've corrected it! Kay


I like this post.
I have a lot of clients who donate.


Noncash donations exceeding $500 require form 8283; if your deduction is exactly $500 the form is not required.

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