Tips To Make Year-End Charitable Giving Payoff At Tax Time

December 14, 2011

If you’re thinking of making year-end donations to your favorite charities, keep these tips in mind to make sure the donations result in a deduction that will help minimize your tax liability for 2011:

• You must be a taxpayer that itemizes deductions on Schedule A of your individual tax return in order to receive a tax benefit for your charitable donation.
• Donations by check must be dated, mailed and postmarked by December 31, 2011 in order to be deducted on your 2011 tax return.  Keep in mind that donations charged to your credit card on or before year-end will also be deductible in 2011 even if you don’t pay the card’s bill until 2012.
• Make sure your donations are made to a qualified charitable or veterans organization or fraternal association classified as a tax-exempt 501(c)(3) organization.  You can ask the organization for proof of qualified status or you can check the IRS web-site for online searchable Publication 78.
• Depending on individual tax circumstances, donors should consider giving gifts of appreciated assets, rather than cash, because the donor can avoid capital-gains tax and get a full deduction for the gift’s value.
• Donors over age 701/2 may contribute up to $100,000 of IRA assets directly to qualified charities.  The IRA trustee must send the gift directly to the group.  There is no deduction for the gift, but the gift is excluded from income, so it doesn’t increase income in a way that raises taxes on Social Security or increases Medicare premiums.  Gifts from IRAs count as part of the required minimum distribution.
• Be aware that, for some very generous folks, there are limits for deduction based on your adjusted gross income for the tax year and the type of charitable organization to which the donations are made.
• You can make donations of household goods that are in good condition, as well as motor vehicles.  It is advisable to take pictures of donated goods to substantiate the condition of the property donated. Special rules apply for determining how much you can deduct for the donation of motor vehicles.
• Keep required records to document your charitable giving.  For all cash donations, be sure to obtain a receipt from the charity and keep your canceled check or financial accounts statement.  For cash or property donations of $250 or more in one day, the IRS requires that you have a receipt from the charity that contains the following information:  a written acknowledgement of the donation from the charity, the charity’s name, the date the property or cash was donation, the location of the donation, and if property, a description of the property.  Most contributions of property valued at $5,000 or more require a written appraisal.

Please contact us for specific questions regarding your year-end charitable contributions at (719) 630-1186.