Can You Fully Document Your Charitable Contributions?
Documenting Charitable Contributions:
Itemized deductions will continue to come under fire from the Internal Revenue Service (IRS) especially with new regulations concerning documentation requirements. Non-profit institutions must send letters to all donors. Donors in turn must have receipts or valid means of documenting their contributions.
Be careful, the Service has the right to deny a contribution deduction if made to an organization that is not registered as a qualified organization. IRS Publication 78 contains a cumulative list of all qualified charitable organizations
.
Charitable contributions are deducted on Schedule A as an itemized deduction. They are not limited by the Alternative Minimum Tax (AMT) calculation. Since the 2001 tax law changes by the Bush Administration many American taxpayers are losing their itemized deductions because of the alternative minimum tax (AMT). The Bush tax cuts lowered the regular tax brackets so that they are comparable to the lower AMT. As such, while losing other itemized deductions, such as unreimbursed business expense or taxes (real estate or state income), may not change your overall tax liability because of AMT, losing a charitable contribution deduction will impact your tax liability. Making sure you've properly documented your deduction is therefore important.
Cash Contributions:
- Contributions greater than $250: Contributions made in excess of $250 (cash and non-cash) must be evidenced by a written acknowledgement from the charity including a description of the property given, or that no property was given and that the organization did not give any services in exchange for the gift.
- Pure cash: Straight cash contributions are very tough to substantiate and you should be aware that the Service must have some substantiation of the deduction, even cash contributions made each week to the Church.
- Documentation requirements: The following represent minimum requirements for documenting your cash donations.
- Name of the charity;
- Evidence of the contribution such as a cancelled check, credit card or bank statement;
- Record of the charity including the amount of the contribution and a description.
- Deducting contributions made for banquets and other charity events is tricky. The value of the contribution is equal to the excess of the benefit. Technically the value of the meal or the value of the round of golf must be deducted from the price of admission to arrive at the amount deductible for charity.
- Timing of the deduction: Only donations given in the tax year are deductible. A pledge is not deductible, but the amount of the donation given toward the pledge is deductible in the year made. However, if you make contributions with a credit card, even if you haven't paid the credit card bill by the end of the year, it is deductible in the year the credit card is used, not paid.
Non-Cash
- Standard non-cash contributions include clothing, furniture, household wares, etc. Contributions made should be substantiated by a value statement. The old version of "he who creates the list values the property" really shouldn't be used today. Web sites by Salvation Army can give a very representative value for the goods donated." Its deductible" a free program from TurboTax online is another great source of information for documenting the value of the goods donated.
- Non-cash donations in excess of $500, either individually or cumulative, must be itemized on Form 8283 and will include a description of the item, the fair market value of the items and the original cost value of the item, where and when the items were donated.
- Non-cash donations in excess of $5,000 MUST be evidenced by an appraisal and acknowledgement from the charity. You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
If you are in need of assistance in determining how to document your charitable donations, let us know and we will be happy to assist.
Regards,
Bill
R. William E. Kruse III
"However beautiful the strategy, you should occasionally look at the results."
Sir Winston Churchill
Hauk Kruse & Associates LLC
721 Emerson Road; Suite 120
Creve Coeur, MO 63141
314.993.4285 (w)
314.993.4288 (f)
