|
|
|
|
We have tons of info here. Use our Search function to find it
fast....
|
|
|
Article added or updated:
03/30/2008 |
Recent Tax Law Changes May Affect People Giving to
Charity: IRS Offers Tips for Year-End Donations for 2006
|
Related Articles:
2006 Tax Tips
Disaster/Theft Loss
Good Tax News
Charitable Donations
2006
IRS FreeFile '06
SUV TAX DEDUCTION LIST
S Corp vs. LLC - The Basics Explained
Self Employed
401k - The Basics Explained
IR-2006-192, Dec. 14, 2006
WASHINGTON — Individuals and businesses making contributions to charity
should keep in mind several important tax law changes made last summer
by the Pension Protection Act.
The new law offers older owners of individual retirement accounts a new
way to give to charity. It also includes rules designed to provide both
taxpayers and the government greater certainty in determining what may
be deducted as a charitable contribution. Some of these changes include
the following.
New Tax Break for IRA Owners
|
|
|
An IRA owner, age 70 ˝ or over, can directly transfer tax-free, up to
$100,000 per year to an eligible charitable organization. This option is
available in tax years 2006 and 2007. Eligible IRA owners can take
advantage of this provision, regardless of whether they itemize their
deductions. Distributions from employer-sponsored retirement plans,
including SIMPLE IRAs and simplified employee pension (SEP) plans are
not eligible.
To qualify, the funds must be contributed directly by the IRA trustee to
the eligible charity. Amounts so transferred are not taxable and no
deduction is available for the amount given to the charity.
Not all charities are eligible under this provision. For example,
donor-advised funds and supporting organizations are not eligible
recipients.
Transferred amounts are counted in determining whether the owner has met
the IRA’s required minimum distribution rules. Where individuals have
made nondeductible contributions to their traditional IRAs, a special
rule treats transferred amounts as coming first from taxable funds,
instead of proportionately from taxable and nontaxable funds, as would
be the case with regular distributions.
|
|
Rules for Clothing and
Household Items
To be deductible, clothing and household items donated to charity after
Aug. 17, 2006, must be in good used condition or better. However, a
taxpayer may claim a deduction of more than $500 for any single item,
regardless of its condition, 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. A bank record
includes canceled checks, bank or credit union statements and credit
card statements. Bank or credit union statements should show the name of
the charity and the date and amount paid. Credit card statements should
show the name of the charity and the transaction posting date.
Donations of money include those made in cash or by check, electronic
funds transfer, credit card, and payroll deduction. For payroll
deductions, the taxpayer should retain a pay stub, 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.
Prior law allowed taxpayers to back up their donations of money with
personal bank registers, diaries or notes made around the time of the
donation. Those types of records are no longer sufficient.
This provision applies to contributions made in taxable years beginning
after Aug. 17, 2006. For taxpayers that file returns on a calendar-year
basis, including most individuals, the new provision applies to
contributions made beginning in 2007.
The new law does not change the prior-law requirement that a taxpayer
get an acknowledgement 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 the requirements of
both provisions.
To help taxpayers plan their holiday-season and year-end donations, the
IRS offers the following additional reminders:
*
Contributions are deductible in the year made. Thus, donations charged
to a credit card before the end of the year count for 2006. This is true
even if the credit-card bill isn’t paid until next year. Also, checks
count for 2006 as long as they are mailed this year.
*
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 on 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.
*
For individuals, only taxpayers who itemize their deductions on Schedule
A can claim a deduction for charitable contributions. This deduction is
not available to people who choose the standard deduction, including
anyone who files a short form (1040A or 1040EZ). A taxpayer will have a
tax savings only if the total itemized deductions (mortgage interest,
charitable contributions, state and local taxes, etc.) exceeds the
standard deduction. Use the 2006 Schedule A, available now on IRS.gov,
to determine whether itemizing is better than claiming the standard
deduction.
*
For all donations of property, including clothing and household items,
get from the charity, if possible, a receipt that includes a 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 a
description of the property and its condition.
*
The deduction for a motor vehicle, boat or airplane donated to charity
is usually limited to the gross proceeds from its sale. This rule
applies if the claimed value of the vehicle is more than $500. Form
1098-C, or a similar statement, must be provided to the donor by the
organization and attached to the donor’s tax return. See IRS Publication
526, Charitable Contributions, for more information.
Related Articles:
2006 Tax Tips
Disaster/Theft Loss
Good Tax News
Charitable Donations
2006
IRS FreeFile '06
SUV TAX DEDUCTION LIST
S Corp vs. LLC - The Basics Explained
Self Employed
401k - The Basics Explained
|
|
As always, please check with your tax professional,
CPA or lawyer
prior to acting on any advice found here. We do NOT dispense advice on
any articles contained here.
Legal Disclaimer
© Copyright 2003-2008 Please do not reproduce or copy without written permission.
SelfEmployedWeb. All Rights Reserved |
|
|
|
