Plan ahead on donations to be safe come tax time
Sunday, November 22, 2009
If you've noticed a slightly more hysterical tone in the fund requests we all get from charities this time of year, there's a reason: Donors, hit by factors as varied as the Madoff scandal and the general economic downturn, have cut back while the charities are facing greater demand for their services.
This makes whatever donations you make this year more than usually welcome, but if you decide to give, be sure to take the steps necessary to qualify for the tax benefits available to donors.
Giving to charity can be a simple as a putting a dollar in a church collection plate or as complex as setting up a private foundation, and the tax requirements follow a similar pattern. The fancier you get, the more complicated the hoops you have to jump through.
The threshold requirement for deducting charitable gifts is that you itemize your deductions on your tax return, rather than taking the standard deduction. This effectively disqualifies many small donors because, unless you own a house and have taxes and maybe a mortgage to pay, your itemized deductions will probably be less than the standard deduction -- $5,700 for single taxpayers and $11,400 for couples this year -- so it will not make sense to itemize.
From time to time Congress debates changing this, but while the idea gets a lot of oratorical support, it never seems to happen.
A second basic requirement is that the recipient of your donation must be a genuine charity. Just because a group is nonprofit doesn't mean it's a charity to which donations are deductible. Legitimate charities will be glad to tell you, but if you are uncertain about a group, you can check the Internal Revenue Service's Publication 78, which is available online at http:/
Now, assuming you've passed those two hurdles, consider whether you intend to give cash or property.
The rules for cash, which includes checks, credit or debit card payments and payroll deductions, depend on the amount.
If you give less than $250, a canceled check, bank statement showing the transfer, or a credit card is sufficient evidence of your gift. If you don't have those, you should get a written receipt from the recipient. In cases where that's not practical, such as with money put into the collection plate at church, it's probably wise to make your gifts in the form of checks, especially if your donations add up to a significant sum.
Further, if you get something for your money, you must subtract the value of that from the amount you deduct. Thus, if you pay $50 to go to a charity dinner and the meal is worth $30, you can deduct only $20.
However, for the purposes of the less-than-$250 rule, the IRS does allow you to treat each of a series of gifts separately. Thus, if you gave $10 every Sunday for 30 weeks, each would still be subject to the rules for gifts of less than $250.
If you give a gift of $250 or more, you must get a written receipt, and the receipt must spell out the amount you gave and whether you received anything of more than token value for your gift. It should also show the date of the gift; if it doesn't, you'll need bank or other records that show when you gave it.