Images of the devastated East Coast splash across our news and social media, and many people are digging into their closets, their pantries, and their pockets to help. Charities begin to ramp up their giving campaigns at this time of year, too. As you consider your charitable giving, there are a number of things to keep in mind to make sure that you are giving wisely – and maximizing the impact of your contribution.
1) Be sure you give to a qualified organization. Make sure the organization asking for your help is actually recognized as a charitable organization. You can check their credentials in the IRS’s searchable database, available online at www.irs.gov/Charities-&-Non-Profits/Search-for-Charities, or by asking the charity for a copy of its “determination letter” – the letter it received from the IRS when it became tax-exempt. You can also search the charity information compiled by Guidestar at www.guidestar.org.
2) Be sure you document your gifts – and get a receipt! The documentation you need is based on what and how much you give. For cash gifts under $250, you can use a bank statement, credit card statement, or cancelled check to evidence your contribution. Cash gifts of more than $250 require a “contemporaneous, written acknowledgement” from the charity – basically, a receipt. The receipt should note the amount contributed, when you contributed it, whether or not you received any goods or services in return and, if so, what they were and how much they were worth.
Gifts of property (non-cash items such as land, artwork, coin or stamp collections, household items, supplies, etc.) always require a receipt which contains the information noted above, as well as a description of the property contributed. Remember that contributions of clothing and household goods must be in good or better used condition to be deductible. If you are leaving the items at a drop box, be sure you keep accurate records of what you left and when you left it. Keep in mind that there are special rules for contributions of cars and boats that must be followed.
3) Giving property worth more than $500? You need to file Form 8283. If your total non-cash (property) contributions for the year are greater than $500, you’ll need to complete and file Form 8283 with your income tax return, to claim the deduction.
4) Giving property worth more than $5,000? You will also need an appraisal. If you make a property gift worth more than $5,000, you need a “qualified appraisal” of the property from a “qualified appraiser.” The IRS criteria for qualified appraisals and appraisers are lengthy, so be sure your tax advisor reviews the appropriate requirements.
5) Watch the timing! You can only deduct a contribution in the year you make the gift. For a gift by check, the date of the gift is the date you mail the check. Gifts charged to your credit card are deductible in the year you make the charge. Gifts of property are deductible when you unconditionally give them to the charity – for a car, that’s when the title is changed with DMV; for real property such as a house, vacation home, or land, it’s when the deed is signed and delivered to the charity; for stock, it’s when the properly endorsed stock certificate is mailed or otherwise delivered to the charity or its agent.
Also, remember that the receipt from the charity (and qualified appraisal, if required) must be in your hands by the time you file the income tax return claiming the deduction – April 15th of the year following the gift or, if you extend, no later than October 15th.
For more information or to schedule a meeting with one of our attorneys, please contact email@example.com