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IR-2009-114, Dec. 8, 2009
WASHINGTON - Individuals and businesses making contributions to charity
should keep in mind several important tax law provisions that have taken effect
in recent years.
Some of these changes include the following:
Special Charitable Contributions for Certain IRA Owners
This provision, currently scheduled to expire at the end of 2009, offers
older owners of individual retirement accounts (IRAs) a different way to give to
charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to
$100,000 per year to an eligible charity. This option, created in 2006, is
available for distributions from IRAs, regardless of whether the owners itemize
their deductions. Distributions from employer-sponsored retirement plans,
including SIMPLE IRAs and simplified employee pension (SEP) plans, are not
eligible.
To qualify, the funds must be contributed directly by the IRA trustee to the
eligible charity. Amounts so transferred are not taxable and no deduction is
available for the transfer.
Not all charities are eligible. For example, donor-advised funds and
supporting organizations are not eligible recipients.
Amounts transferred to a charity from an IRA are counted in determining
whether the owner has met the IRA’s required minimum distribution. Where
individuals have made nondeductible contributions to their traditional IRAs, a
special rule treats transferred amounts as coming first from taxable funds,
instead of proportionately from taxable and nontaxable funds, as would be the
case with regular distributions. See Publication
590, Individual Retirement Arrangements (IRAs), for more information on qualified
charitable distributions.
Rules for Clothing and Household Items
To be deductible, clothing and household items donated to charity generally
must be in good used condition or better. A clothing or household item for which
a taxpayer claims a deduction of over $500 does not have to meet this standard
if the taxpayer includes a qualified appraisal of the item with the return.
Household items include furniture, furnishings, electronics, appliances and
linens.
Guidelines for Monetary Donations
To deduct any charitable donation of money, regardless of amount, a taxpayer
must have a bank record or a written communication from the charity showing the
name of the charity and the date and amount of the contribution. Bank records
include canceled checks, bank or credit union statements, and credit card
statements. Bank or credit union statements should show the name of the charity,
the date, and the amount paid. Credit card statements should show the name of
the charity, the date, and the transaction posting date.
Donations of money include those made in cash or 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 document
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 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.
Reminders
To help taxpayers plan their holiday-season and year-end giving, the IRS
offers the following additional reminders:
- Contributions are deductible in the year made. Thus, donations charged to a
credit card before the end of 2009 count for 2009. This is true even if the
credit card bill isn’t paid until 2010. Also, checks count for 2009 as long as
they are mailed in 2009 and clear, shortly thereafter.
- Check that the organization is qualified. Only donations to qualified
organizations are tax-deductible. IRS Publication 78, available online and at
many public libraries, lists most organizations that are qualified to receive
deductible contributions. The searchable online version can be found at IRS.gov under
Search for Charities. In addition, churches, synagogues, temples, mosques and
government agencies are eligible to receive deductible donations, even if they
are not listed in Publication 78.
- 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, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings
only if the total itemized deductions (mortgage interest, charitable
contributions, state and local taxes, etc.) exceed the standard deduction. Use
the 2009 Form 1040 Schedule A to determine whether itemizing is better than
claiming the standard deduction.
- For all donations of property, including clothing and household items, get
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 that value. Additional rules apply for a contribution of $250
or more.
- The deduction for a motor vehicle, boat or airplane donated to charity is
usually limited to the gross proceeds from its sale. 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.
For additional information on charitable giving:
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