IRS Offers Updated Tax Tips for Year-End Donations to Charity
Individuals and businesses making contributions to charity should keep in
mind several important tax law provisions that have taken effect in recent
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. Some of these changes include the
Special Charitable Contributions for Certain IRA Owners
An IRA owner, age 70 ½ or over, can directly transfer tax-free up to $100,000
per year to an eligible charitable organization. This option, created in 2006
and recently extended through 2009, is available to eligible IRA owners,
regardless of whether they itemize their deductions. Distributions from
employer-sponsored retirement plans, including SIMPLE IRAs and simplified
employee pension (SEP) plans, are not eligible.
To qualify, the funds must be contributed directly by the IRA trustee to the
eligible charity. Amounts so transferred are not taxable and no deduction is
available for the amount given to the charity.
Not all charities are eligible. For example, donor-advised funds and
supporting organizations are not eligible recipients.
Transferred amounts are counted in determining whether the owner has met the
IRA’s required minimum distribution rules. Where individuals have made
nondeductible contributions to their traditional IRAs, a special rule treats
transferred amounts as coming first from taxable funds, instead of
proportionately from taxable and nontaxable funds, as would be the case with
regular distributions. See Publication 590, Individual Retirement Arrangements
(IRAs), for more information on qualified charitable distributions.
Rules for Clothing and Household Items
To be deductible, clothing and household items donated to charity must be in
good used condition or better. A clothing or household item for which a taxpayer
claims a deduction of over $500 does not have to be in good used condition or
better if the taxpayer includes a qualified appraisal of the item with the
return. Household items include furniture, furnishings, electronics, appliances,
Guidelines for Monetary Donations
To deduct any charitable donation of money, regardless of amount, a taxpayer
must have a bank record or a written communication from the charity showing the
name of the charity and the date and amount of the contribution. Bank records
include canceled checks, bank or credit union statements, and credit card
statements. Bank or credit union statements should show the name of the charity,
the date, and the amount paid. Credit card statements should show the name of
the charity, the date, and the transaction posting date.
Donations of money include those made in cash or by check, electronic funds
transfer, credit card, and payroll deduction. For payroll deductions, the
taxpayer should retain a pay stub, a Form W-2 wage statement or other document
furnished by the employer showing the total amount withheld for charity, along
with the pledge card showing the name of the charity.
These requirements for monetary donations do not change or alter the
long-standing requirement that a taxpayer obtain an acknowledgment from a
charity for each deductible donation (either money or property) of $250 or more.
However, one statement containing all of the required information may meet the
requirements of both provisions.
To help taxpayers plan their holiday-season and year-end giving, the IRS
offers the following additional reminders:
- Contributions are deductible in the year made. Thus, donations charged
to a credit card before the end of the year count for 2008. This is true
even if the credit card bill isn’t paid until next year. Also, checks count
for 2008 as long as they are mailed this year.
- Check that the organization is qualified. Only donations to qualified
organizations are tax-deductible. IRS Publication 78, available online and
at many public libraries, lists most organizations that are qualified to
receive deductible contributions. The searchable online version can be found
at IRS.gov under “
for Charities.” In addition, churches, synagogues, temples, mosques and
government agencies are eligible to receive deductible donations, even
though they often are not listed in Publication 78.
- For individuals, only taxpayers who itemize their deductions on
Form 1040 Schedule A
can claim deductions for charitable contributions. This deduction is not
available to people who choose the standard deduction, including anyone who
files a short form (Form 1040A or
1040EZ). A taxpayer
will have a tax savings only if the total itemized deductions (mortgage
interest, charitable contributions, state and local taxes, etc.) exceeds the
standard deduction. Use the 2008 Form 1040 Schedule A, available now on
IRS.gov, to determine whether itemizing is better than claiming the standard
- For all donations of property, including clothing and household items,
get from the charity, if possible, a receipt that includes the name of the
charity, date of the contribution, and a reasonably-detailed description of
the donated property. If a donation is left at a charity’s unattended drop
site, keep a written record of the donation that includes this information,
as well as the fair market value of the property at the time of the donation
and the method used to determine that value.Additional rules apply for a
contribution of $250 or more.
- The deduction for a motor vehicle, boat or airplane donated to charity
is usually limited to the gross proceeds from its sale. This rule applies if
the claimed value of the vehicle is more than $500.
Form 1098-C, or a
similar statement, must be provided to the donor by the organization and
attached to the donor’s tax return.
- If the amount of a taxpayer’s deduction for all noncash contributions is
over $500, a properly-completed Form 8283 must be submitted with the tax