It’s the end of the year, so we thought we’d offer some tips on charitable giving. There are only a few days left to donate items before the end of the year. Giving to charity is about more than just saving on your taxes, it’s also about helping a cause that’s important to you. You could save a panda, or cure a disease, or help someone who is hungry. Giving to charity is a way for you to decide where your money goes.
The question is, how do you know if the charitable institution you’re giving to is worthwhile? Are they putting your money to good use? Also, what should you donate? Cash? Items you no longer need or use? How much can you donate? What documentation do you need for the IRS? Answers inside.
What Should I Donate?
Donating cash is convenient, but donating items you don’t use can be just as easy and there’s the added benefit of getting all that crap out of your basement. If you have items that are in good condition, save them from the landfill and help someone at the same time by donating them to charity. You can deduct the fair market value of all the items you donate.
Who Should I Donate It To?
The American Institute of Philanthropy is a watchdog group that rates charities based on their efficiency. Their goal is is to maximize the effectiveness of every dollar contributed to charity by providing donors with the information they need to make more informed giving decisions. Here are some examples of charitable institutions that received an A+, the highest rating:
Multiple Myeloma Research Institute
Christian Foundation For Children And Aging
The Conservation Fund
American Kidney Fund
Deafness Research Foundation
The American Red Cross
American Refugee Comittee
Catholic Relief Services
International Medical Corps
National Alliance for Research on Schitzophrenia and Depression
Intrepid Fallen Heroes Fund
Big Brothers, Big Sisters of America
Cedars Home for Children
How Much Can I Donate?
Donations are limited to 50% of a person or couple’s total earnings for 2006. If you’re thinking of donating stocks and bonds, you’re limited to 30% of your total earnings. Any donations of stocks and bonds must be of items that have increased during the calander year, and will be rated at their value on the day of the donation.
What Documentation Do I Need?
According to Goodwill Industries website, the IRS has tightened the rules for giving, especially when donating used items. Cash donations now require a receipt from the charity, a canceled check, or credit card statement to prove their donation, and you may not claim a deduction if you cannot provide supporting documentation. “For material donations, donors may claim a deduction only for items that are in “good” condition. For items worth more than $500, a qualified appraisal must accompany the claim.”
You might consider taking photographs of the items before you donate them to prove they were in good condition. What does “good” condition mean? “A good rule of thumb to follow when determining the condition of something you want to donate is to consider whether or not you would give it to a relative or a friend,” says George W. Kessinger, President and CEO of Goodwill Industries. “If the answer is yes, then it’s fit to donate and most likely in “good” condition.”
What IRS Resources Are There?
The IRS provides detailed instructions on deducting all types of charitable donations from cars to a pair of jeans that no longer fit your ass.
Publication 526, Charitable Deductions
Publication 561, Determining the Value of Donated Property
What Forms Does The IRS Require?
From irs.gov: “If you claim a deduction on your return of over $500 for all contributed property, you must attach a Form 8283 (PDF), Noncash Charitable Contributions, to your return. If you claim a total deduction of $5,000 or less for all contributed property, you need only complete Section A of Form 8283. If you claim a deduction of more than $5,000 for an item or a group of similar items, you generally need to complete Section B of Form 8283 which requires, in most cases, an appraisal by a qualified appraiser.” —MEGHANN MARCO