While all contributions must be substantiated, contributions of $250 or more require a written receipt from the charity. If you donate property valued at more than $500, additional requirements apply.

General rules. For a contribution of cash, check, or other monetary gift, regardless of amount, you must maintain a bank record or a written communication from the donee organization showing its name, plus the date and amount of the contribution. It’s not sufficient to maintain other written records, such as a log of contributions. For a contribution of property other than money, you generally must maintain a receipt from the donee organization showing its name, the date and location of the contribution, and a detailed description (but not the value) of the property. You need not obtain a receipt for a property donation, however, if circumstances make obtaining a receipt impracticable. In that case, you must maintain a reliable written record of the contribution. The information required in such a record depends on factors such as the type and value of property contributed.

Stricter substantiation requirements apply in the case of charitable contributions with a value of $250 or more. No charitable deduction is allowed for any contribution of $250 or more unless you substantiate the contribution by a contemporaneous written acknowledgement of the contribution by the donee organization. You must have the receipt in hand by the time you file your return (or by the due date, if earlier) or you won’t be able to claim the deduction. The acknowledgement must include the amount of cash and a description (but not value) of any property other than cash contributed, whether the donee provided any goods or services in consideration for the contribution, and a good faith estimate of the value of any such goods or services. If you received only “intangible religious benefits,” such as attending religious services, in return for your contribution, the receipt must say so. This type of benefit is considered to have no commercial value and so doesn’t reduce the charitable deduction available.

If you make separate contributions of less than $250, you won’t be subject to the requirement to get a written receipt, even if the sum of the contributions to the same charity total $250 or more in a year. Also, if you have contributions withheld from your wages, the deduction from each payment of wages is treated as a separate contribution for purposes of the $250 threshold.

In general, if the total charitable deduction you claim for non-cash property is more than $500, you must attach a completed Form 8283 (Noncash Charitable Contributions) to your return or the deduction is not allowed. In general, you are required to obtain a qualified appraisal for donated property with a value of more than $5,000, and to attach an appraisal summary to the tax return. A qualified appraisal isn’t required for publicly-traded securities for which market quotations are readily available. A partially completed appraisal summary and the maintenance of certain records are required for (1) nonpublicly-traded stock for which claimed deduction is greater than $5,000 and no more than $10,000, and (2) certain publicly-traded securities for which market quotations are not readily available. A qualified appraisal is required for gifts of art valued at $20,000 or more.

Recordkeeping for contributions for which you receive goods or services. If you receive goods or services, such as a dinner or theater tickets, in return for your contribution, your deduction is limited to the excess of what you gave over the value of what you received. For example, if you gave $100 and in return received a dinner worth $30, you can deduct $70. But your contribution is fully deductible if:

• you received free, unordered items from the charity that cost no more than $9.10 in 2008 ($8.90 in 2007) in total;
• you gave at least $45.50 in 2008 ($44.50 in 2007) and received only token items (bookmarks, key chains, calendars, etc.) that bear the charity’s name or logo and cost no more than $9.10 in 2008 ($8.90 in 2007) in total; or
• the benefits that you received are worth no more than 2% of your contribution and no more than $91 in 2008 ($89 in 2007)

If you made a contribution of more than $75 for which you received goods or services, the charity must give you a written statement, either when it asks for the donation or when it receives it, that tells you the value of those goods or services. Be sure to keep these statements.

Cash contribution made through payroll deductions. A contribution that you make by withholding from your wages may be substantiated by a pay stub, Form W-2, or other document furnished by your employer that shows the amount withheld for the purpose of a payment to a charity. You can substantiate a single contribution of $250 or more with a pledge card or other document prepared by the charity that includes a statement that it doesn’t provide goods or services in return for contributions made by payroll deduction.
The deduction from each wage payment of wages is treated as a separate contribution for purposes of the $250 threshold.

Substantiating contributions of services. Although you can’t deduct the value of services you perform for a charitable organization, some deductions are permitted for out-of-pocket costs you incur while performing the services. You should keep track of your expenses, the services you performed and when you performed them, and the organization for which you performed the services. Keep receipts, canceled checks, and other reliable written records relating to the services and expenses.
As discussed above, a written receipt is required for contributions of $250 or more. This presents a problem for out-of-pocket expenses incurred in the course of providing charitable services, since the charity doesn’t know how much those expenses were. However, you can satisfy the written receipt requirement if you have adequate records to substantiate the amount of your expenditures, and get a statement from the charity that contains a description of the services you provided, the date the services were provided, a statement of whether the organization provided any goods or services in return, and a description and good-faith estimate of the value of those goods or services.

Year-End Tax Tips: Gifts to Family & Friends

Did you know that charities have recently experienced a significant decline in donations due to the current economic crisis?   Since so many people have lost their jobs, taken pay cuts or suffered losses in the stock market, they are less likely to give money to charitable organizations.  However, writing a check to a local charity is not the only way to help others in need.  Consider donating old clothes, toys or electronics that are no longer useful to your family.  Not only will you be helping a worthy cause, but you will be able to estimate your deductions to determine if you are eligible to itemize instead of taking a standard deduction.

Although charitable donations are a great way to receive a tax deduction it is important to remember these things:

• Charitable donations are only deductible if you itemize
• You must make donations by December 31^st to take a deduction for the current year
• Be sure your make your donations to qualified organizations and obtain a receipt

Check out this link to determine the value of your donations for 2008:

http://www.salvationarmysouth.org/valueguide.htm

Please visit this website for more information on charitable donations, deductions and limitations for 2008:

http://taxes.about.com/b/2008/12/01/giving-to-charity-year-end-tax-tips.htm

Have you ever wondered how to get a tax deduction without writing a check? There’s one deduction that’s available to you in your own home and it doesn’t take a lot of effort to get it.

We all have clothing, furniture and household items in our homes that are not being used. Giving those items to a qualified charity helps in more ways than one. First, you are ridding your home of clutter and unused items. Secondly, by donating them to a charity, you are allowing less fortunate individuals to buy these items from the charity’s thrift store at far less than the item’s value when new. And lastly, you receive a tax deduction for the fair market value of those items on your tax return.

All you have to do is make a list of the items given and obtain a receipt from the charity. You’ll also need to value each item. This is generally what the charity’s thrift store is selling the item for, not what you paid for it or even what you think it’s worth. There are also several guides available on the internet to assist you in assigning value to the items.  For higher value items, you make want to take pictures for your tax file and notate on your list the reason for the higher value (designer clothing, etc).  It is also important to remember that only items in “good condition or better” are eligible for the deduction.

Simply file your receipt and list with your tax documents and provide it to us with your tax organizer. You’ll receive the pay-off for those few hours of your time when you file your tax return next year.

CASH CONTRIBUTIONS

For cash contributions or other monetary gifts that are less than $250, no charitable contribution deduction is allowed unless the donor maintains as a record of the contribution a bank record or a written acknowledgement from the charitable recipient.  The acknowledgement should reflect the name of the charitable organization and the date and amount of the contribution.  This new rule applies to any contribution of money, regardless of the amount.  If you do not have a bank record for your contribution, you must have the written communication from the charity in hand by the time you file your return (or by the due date, if earlier) or you will not be able to claim the deduction.

For cash contributions of $250 or more, the law has not changed.  You must have a written acknowledgement from the charity in order to deduct the contribution.

DONATION OF CLOTHING AND HOUSEHOLD ITEMS

For a contribution of clothing or a household item, the donor will not be allowed a contribution deduction unless the donated item is in “good used condition or better.”  In addition, the IRS may deny a deduction for any item with minimal monetary value, such as used socks or undergarments.  There is an exception to the “good used condition or better” rule, which allows a deduction of more than $500 to be taken for a single item of clothing or a household item that is not in good used condition or better if a qualified appraisal is attached to the tax return.