Cook Wealth Management Group

Tax Efficient Charitable Giving

charitable contributions

During the holidays, as we’re reminded to give, it’s a good time to learn more about tax efficient charitable giving. To make the most of your contributions, it’s important to know the restrictions for deductions and donations, as well as the documentation required.

Donations

  • Donations of stock or other property are usually valued at the fair market value of the property. Appraisals may be required for various non-cash donations, and special rules apply to donation of vehicles.
  • Clothing and household items donated must generally be in good used condition or better to be deductible.
  • For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given.

Deductions

  • Contributions must be made to qualified organizations to be deductible. You cannot deduct contributions made to specific individuals, political organizations or candidates.
  • You cannot deduct the value of your time or services. Nor can you deduct the cost of raffles, bingo or other games of chance.
  • If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.
  • Congress may restore the break* for direct IRA payouts to charity for 2010, but you may not exceed $100,000 in QCDs (Qualified Charitable Distributions.)  A qualified charitable distribution is nontaxable and made directly by the trustee of your IRA (non-SEP or SIMPLE) to an eligible organization. If you file a joint return, your spouse can also have a QCD of up to $100,000.

Documentation

  • To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.
  • To claim a deduction for contributions of cash or property equaling $250 or more you must have a record (either a bank record, a payroll deduction record, or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift.)
  • One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.
  • If your total deduction for all noncash contributions for the year is over $500, you must complete and attach Form 8283 to your tax return. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires a qualified appraisal.

Remember, charitable gifts must be made on or before December 31, 2010 to be deductible on your 2010 return.


Consult your tax advisor before employing these or any other tax strategies.
*Refers to the lapse of the allowance of IRA withdrawals given to charities after 12/31/09. Although it is rumored that Congress will reinstate this deduction, a decision has not yet been made.
Content derived from www.irs.gov and Kiplinger Tax Letter, July 23, 2010.
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