taxgeekblog.com

OK, it is that time a year when all good taxpayers are planning for their Tax Returns (please, don’t laugh so hard, I don’t need you in the hospital).  One of the things you should be doing is getting ready to make those last minute donations of money and goods to try to reduce your income.  Well, there are some important things to know if you are going to survive the tax mans critical eye….

1. Contributions must be made to qualified organizations to be deductible. You cannot deduct contributions made to specific individuals, political organizations and candidates. This means that when Marge came around to collect money for little jimmies surgery, it was not deductable.  If someone sets up a fund to support some poor kid’s cancer care, it is not deductable.  In fact, you can go to the IRS.Gov web site and look up all of the qualified charities, if the charity is not on the list, Don’t try it                                                                                                                                
2. You cannot deduct the value of your time or services. Nor can you deduct the cost of raffles, bingo or other games of chance. Just because you gave your time on a Boy Scout weekend getaway, does not mean you get to deduct $35 an hour for the 72 hour weekend. (You can deduct some other expenses though.  Call me)                       
3. If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received. That message you got at the charity auction, enjoy it because if you paid $50 bucks for a $75 message, you get no deduction.  This is actually a HUGE pet peeve of mine.        (and the subject of another RANT from me)                                                                                                                              
4. Donations of stock or other property are usually valued at the fair market value of the property. Special rules apply to donation of vehicles.   This is a great way to save tax money for large capital gains items, while still getting a tax write off.                                                                                                                                       
5. Clothing and household items donated must generally be in good used condition or better to be deductible. It would be nice if the IRS had provided a definition for good, but we work with it.  My recommendations, take pictures of what you donate, save them to a CD, and then keep them with your tax records.  You can use several methods for determining how much to donate.  I have a great sheet that gives you some numbers, but you have to email me at dana@maggiemayer.com to get it.                                                                                                                                             
6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution.   This is a pretty good idea anyway, but the IRS has disallowed cancelled checks to churches, so get in their envelope system and get a yearend statement.                                                                                     
7. To claim a deduction for contributions of cash or property equaling $250 or more you must obtain a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document from the organization may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. Not to many worries here, all organizations want your money, so they fulfill this requirement for you, but you need to keep it, not toss it!                                                                                                                                               
8. If you claim a deduction of more than $500 for all contributed property, you must attach IRS Form 8283, Noncash Charitable Contributions, to your return.   This is your tax professional’s duty, but don’t complain if they have to charge you a little more for it!                                                                                                            
9. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser.   If you have something worth more than $5,000 to give away, call me I’m poor!                                                                                                                 
10. Contributions made for relief efforts in a Midwest disaster area receive special benefits. For more information, see Publication 4492-B, Information for Affected Taxpayers in the Midwest Disaster Areas.   They allow higher limits for what you can deduct for mileage and cash donations.

So, remember…it is useless to give away money for the deduction.  You are better off with the money and the tax bill!!!!  Give away money for the love from your heart

Dana