You probably think that I’m talking about the fact that for some disturbing reason, retailers have packed the stores with Christmas goodies – and Halloween isn’t even over yet (who buys stuff this early anyway?).
But I’m not.
I’m talking about solicitations. It’s the time of the year when charitable organizations come calling. So far this month, I’ve received more than ten charitable solicitations from tax-exempt organizations: my daughter’s school, college, law school, the arboretum, PHS, the zoo, the art museum, public radio, public television and more. We’re sorting through all of them, trying to decide which ones to support. In addition, we’re plowing through piles of summer clothes since fall has finally decided to pay us a visit in the northeast… and putting them into piles: save, toss and donate.
Why the rush? Why now? Because you only have 62 days to incur additional charitable deductions for the calendar year 2007. Tax professionals know this. Charitable organizations know this. And now you do, too.
Charitable donations are a good way for many taxpayers to increase deductions and get a warm fuzzy or two in the process. Whether you donate cash or goods (like our used clothes and toys), you can take these deductions on your tax return – but only if you itemize.
Remember, cash deductions, regardless of the amount, must be substantiated by a bank record (such as a canceled check or credit card receipt) or in writing from the organization. The writing must include the date, the amount and the organization that received the donation. In other words, loose change in the offering plate doesn’t count.
My advice when making a financial donation?
1. Get a receipt. Just ask. If the organization is taking your money, they ought to be able to produce a receipt.
2. Consider using a check or credit card.
3. And finally, don’t let the tax tail wag the dog. Those kids in the neighborhood who are collecting for UNICEF? C’mon, be charitable. It is, after all, the spirit of giving that should really matter and not the deduction.
When it comes to donations of items, and not money, the rule is that you can generally take a deduction for the current FMV of the items donated to charity – not the purchase price but rather what the item would sell for in its current condition. So if you can’t give that tiki bar away because it’s practically worthless, you may not attempt to take a deduction for $25 when you donate it to the qualified charity of your choice. I like to use the “thrift shop value” when I make a donation; in other words, what the item would likely sell for in a shop. To get an idea of appropriate values, try this web site.
You should note that this information is for household items; special rules apply to appreciated goods like stock or jewelry, or hard to value items such as artwork.
To substantiate your deduction on your personal return, you need to obtain a receipt from the charitable organization which has:
* the name of the charity
* the date of the gift
* the location of the charity
* a detailed description of the property donated
With respect to the description, I’ve said before that my mother is one of the best writers for lists of donated property I’ve seen. She writes “three men’s dress shirts, good condition; two pairs of work shoes, never worn” and so on, noting the condition. That level of description is practically perfect.
The IRS now requires that noncash charitable contributions be considered to be in “good” condition or better, or the contribution is disallowed. There is an exception to the rule: if the item is valued over $500 but not in “good” condition, you may still take the deduction if you have an appraisal for the item.
The law does not define what “good used condition or better” means but use some common sense: clothing with holes or stains on them, books missing pages or dish sets that are cracked or broken are not in “good condition.” To be safe, I use this rule of thumb: would I want this? Chances are if you would be embarrassed to put those clothes on yourself or your children or put those items in your house, it likely isn’t appropriate as a donation in “good used condition.”
As the season approaches, I hope that you’ll remember to be charitable; no matter what your income level, you can likely do something good from donating cash to a used prom dress. There are a number of organizations who could use your help. For more information about charitable organizations, check out The 501(c)Files.
