Charitable Donations Rules

As the end of the year approaches and our minds are focused on the holiday season, we can help others in this time of economic distress and lower our tax bill by making donations to charity prior to the end of the year.

Some of the the items you can donate are furniture, furnishings, electronics, appliances, linens, clothing and of course cash. In order for your clothings or household items to be deductable, they must be in good used condition or better. Torn or stained clothing does not qualify. Clothing or household items which you claim a deduction of over $500 does not have to be in good used condition or better if you include a qualified appraisal of the item with the return.

Donations of money include those made in cash, check, electronic funds transfer, credit card, and payroll deduction. So if your employer lets you make a charitable donations through automatic payroll withdrawls, you 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.

To deduct any charitable donation of money, regardless of amount, you 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.

Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the year count for 2008. This is true even if the credit card bill isn’t paid until next year. Also, checks count for 2008 as long as they are mailed this year. You must also obtain ackowledgement from the charity for donations of property or cash of $250 more. 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.

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 though they often are not listed in Publication 78.