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With less than two weeks left in 2013, individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years. The IRS has issued guidance on a number of items concerning charitable contributions from IRAs, donations of clothing and household items, and monetary donations.
With less than two weeks left in 2013, individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years. The IRS has issued guidance on a number of items concerning charitable contributions from IRAs, donations of clothing and household items, and monetary donations.
Special Tax-Free Charitable Distributions for Certain IRA Owners
Owners of individual retirement arrangements (IRAs) that are age 70 1/2 or over can directly transfer tax-free up to $100,000 per year to an eligible charity. If you fall into this category, you better act soon as this provision is currently scheduled to expire at the end of 2013. This option can be used 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 for this provision. To view other fine print on which charities are eligible, how funds must be transferred, and more, see Publication 590, Individual Retirement Arrangements (IRAs), for more information on qualified charitable distributions.
Rules for Charitable Contributions of Clothing and Household Items
To be tax-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. When donating clothing and household items, don’t forget to ask the charity for written acknowledgment from the charity for all gifts worth $250 or more. Household items include furniture, furnishings, electronics, appliances and linens.
Guidelines for Monetary Donations
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 for the taxpayer to be able to deduct the charitable donation on his or her taxes. 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 made by cash or by check, electronic funds transfer, credit card, and payroll deduction all count as monetary donations. For payroll deductions, taxpayers need 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.
Keep in mind that 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:
IRS.gov has additional information on charitable giving including:
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