It’s the time of year for giving gifts — and to make some last-minute decisions about the tax implications of your gifts to charity.
And if you were familiar with the rules, the Internal Revenue Service is reminding individuals and businesses of changes involving several areas.
Charitable contributions for certain IRA owners:
This provision, which expires at the end of this year, offers older owners of IRAs a different way to give to charity. An IRA owner 70 ½ or older can directly transfer tax-free up to $100,000 per year to an eligible charity.
This option 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 plans, are not eligible.
To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts 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.
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 claimed at more than $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, 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.
These requirements 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.
IRS Publication 78, searchable and available online, lists most organizations that are qualified to receive deductible contributions. It 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.