Tax Tips for 2015 Year-End Gifts to Charity
Some Rules for Charitable Contributions of Clothing and Household Items
Household items include furniture, furnishings, electronics, appliances and linens. Clothing and household items donated to charity generally must be in good used condition or better to be tax-deductible. Clothing or household items for which a taxpayer claims a deduction of over $500 do not have to meet this standard if the taxpayers include a qualified appraisal of the item with the return.
Donors must obtain a written acknowledgement from the charity for all gifts worth $250 or more. It must include, among other things, a description of the items contributed.
Guidelines for Monetary Donations
A taxpayer must have a bank record or a written receipt from the charity in order to deduct any contribution of money, regardless of amount. The record must show the name of the charity, the date of donation, and amount of the contribution. Bank records include canceled checks, credit union and credit card statements. Bank, credit union and credit card statements should show the name of the charity, the date, and the amount paid.
Donations of money include those made in cash, 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 documents 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 the deduction of monetary donations do not change the long-standing requirement that a taxpayer must 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 both requirements.
The IRS offers the following additional reminders to help taxpayers plan their holiday and year-end gifts to charity:
Qualified charities. Check that the charity is eligible. Only donations to eligible organizations also known 501(c) (3) organizations are tax-deductible. Select Check, a searchable online tool available on IRS.gov, lists most organizations that are eligible to receive deductible donations. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations. That is true even if they are not listed in the tool’s database.
Year-end gifts. Contributions are deductible in the year made. Therefore, donations charged to a credit card before the end of 2015 count for 2015, even if the credit card bill isn’t paid until 2016. Also, checks count for 2015 as long as they are mailed in 2015.
Itemize deductions. 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 individuals who choose the standard deduction. This includes anyone who files a short form the IRS Form 1040A or 1040EZ. A taxpayer will have tax savings only if the total itemized deductions; mortgage interest, charitable contributions, state and local taxes, etc exceed the standard deduction. Use the 2015 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
Record keeping. For all donations of property, including clothing and household items, obtain 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 monetary value. Prepare a handwritten list of items and other information, if necessary.
Special Rules. The deduction for automobile, boat or airplane donated to charity is usually limited to the gross proceeds from its sale by the charity. This rule applies if the claimed value 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 return.
Zaher Fallahi, CPA, Esq., CPA, is an IRS Debt Relief Lawyer, practices as Los Angeles Tax CPA and Orange County Tax CPA, and assists clients in solving their tax problems with respect to OVDP, FBAR, FATCA and tax audit. Zaher Fallahi has been rated 10 out of 10 by Avvo http://www.avvo.com/attorneys/90024-ca-zaher-fallahi-1955056.html . About 1.8% of the US lawyers are also CPAs, and Zaher Fallahi is one of them. Zaher Fallahi was named a top tax attorney in September 2015 http://www.ocbar.org/AllNews/NewsView/tabid/66/ArticleId/1631/Coast-Magazine-Names-OCBA-Members-Top-Attorneys.aspx Telephones: (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), e-mail email@example.com