IRS Provides Year-End Advice for Giving Charitable Contributions

As the end of 2013 approaches, many will choose to make charitable contributions during the holidays, not only out of the kindness of their hearts but also for the tax benefits.  The IRS has released guidance and reminders on charitable giving for those who want to be sure their contributions are deductible for income tax purposes.

Monetary Donations

When a taxpayer makes a charitable donation of money, for the donation to be deductible, the taxpayer must have written evidence of the donation that that includes the name of the charity, the date of the donation, and the amount given.  Monetary donations include those made using cash, checks, wire transfers, credit card transfers, or direct contributions from payroll.

If the monetary donation is less than $250, the evidence can be in the form of a receipt from the organization, cancelled checks or bank statements, or credit card statements.  If the monetary donation is $250 or more, the evidence must be a receipt or other evidence from the charitable organization.

Donations of Clothing and Household Items

When a taxpayer donates clothing or household items, those items must be in good and working condition in order to be considered tax deductible.  Household items include furniture, electronics, appliances, and other furnishings.

If the value of the clothing or household items is more than $250, the taxpayer must get a written receipt from the charity that lists the items donated.  For items greater in value than $500, the taxpayers typically need an appraisal of the item, which they can use to support the deduction for income tax purposes.

Charitable Contributions from IRAs for Taxpayers Over 70 1/2 Years Old

Taxpayers over the age of 70 1/2 can donate up to $100,000 in 2013 from an IRA to certain charitable organizations.

This deduction, which first went into effect in 2006, is currently set to expire at the end of 2013.

Additional IRS Charitable Contribution Guidelines

The IRS highlighted the following key points that taxpayers commonly misunderstand when it comes to making charitable contributions.

  • Taxpayers can deduct charitable contributions in the year they make the contributions.  Therefore, contributions for 2013 must be made no later than December 31, 2013.  The date of the contribution is the date when the transfer of funds or goods takes place.  In the case of checks, it is the date the taxpayer mails or physically hands the check to the charitable organization.
  • Taxpayers can deduct charitable contributions only when they are made to qualified organizations.  Qualified charitable organizations include churches and governmental agencies, as well as those organizations listed by the IRS at http://apps.irs.gov/app/eos/.
  • Taxpayers must select to itemize their income tax deductions using Schedule A of Form 1040 in order to claim charitable deductions.  Each taxpayer should determine whether using itemized deductions or the standard deduction provides them the best tax benefit.
  • The donation of any vehicle, including cars, boats, and airplanes, is typically limited to the amount for which the charity then sells the vehicle.

When taxpayers claim charitable contributions of non-monetary items with a value over $500, the taxpayers must include Form 8283 with their tax returns.

by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.