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William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Donation’

Year-End Gifts to Charity – IRS Tax Facts

Posted by William Byrnes on December 1, 2014

9dc30-6a00d8341bfae553ef01bb07b43355970d-piThe Internal Revenue Service reminds individuals and businesses making year-end gifts to charity that several important tax law provisions have taken effect in recent years. Some of the changes taxpayers should keep in mind include:

Rules for Charitable Contributions of Clothing and Household Items

Household items include furniture, furnishings, electronics, appliances and linens. Clothing and household items donated to charity generally must be in good used condition or better to be tax-deductible. 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.

Donors must get a written acknowledgement from the charity for all gifts worth $250 or more. It must include, among other things, a description of the items contributed.

Guidelines for Monetary Donations

A taxpayer must have a bank record or a written statement from the charity in order to deduct any donation of money, regardless of amount. The record must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union 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 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, 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.

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.


The IRS offers the following additional reminders to help taxpayers plan their holiday and year-end gifts to charity:

  • Qualified charities. Check that the charity is eligible. Only donations to eligible organizations are tax-deductible. Select Check, a searchable online tool available on IRS.gov, lists most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations. That is true even if they are not listed in the tool’s database.
  • Year-end gifts. Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2014 count for 2014, even if the credit card bill isn’t paid until 2015. Also, checks count for 2014 as long as they are mailed in 2014.
  • Itemize deductions. For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction. This includes anyone who files a short form (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.) exceed the standard deduction. Use the 2014 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
  • Record donations. For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed 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 this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
  • Special Rules. The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value 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.

If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.

IRS YouTube Videos: 

Year-End Tax Tips: English
Charitable Contributions: English | Spanish | ASL
Exempt Organizations Select Check: English | Spanish | ASL

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7 Tax Facts on Deducting Charitable Contributions to a Charity

Posted by William Byrnes on May 9, 2014

2014_tf_on_individuals_small_businesses-m_1In its Tax Tip 2014-39, the IRS disclosed that a taxpayer looking for a tax deduction may donate to a charity and create a ‘win-win’ situation.  The IRS stated that it is good for the charity and good for the taxpayer.  (subscribe by email on the left menu to these daily tax articles)

7 tax tips to know about deducting gifts to charity

1. A taxpayer must donate to a qualified charity if the taxpayer wants to deduct the gift.  Importantly, a taxpayer can not deduct gifts to individuals, political organizations or candidates.  Search the >online IRS database< for the charity.  If it is on the list, then it is qualified.

2. In order for a taxpayer to deduct contributions, the taxpayer must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with the federal tax return.

3. If a taxpayer receives a benefit in return for the contribution, the deduction will be limited.  A taxpayer can only deduct the amount of the gift that is more than the value of what the taxpayer received in return.  Examples of such benefits include merchandise, meals, tickets to an event or other goods and services in exchange for a donation.

4. If a taxpayer donates property instead of cash, the deduction is usually that item’s fair market value. Fair market value is generally the price the taxpayer would receive if the taxpayer sold the property on the open market.  A taxpayer must file Form 8283, Noncash Charitable Contributions, if the deduction for all noncash gifts is more than $500 for the year.

5. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to >vehicle donations<.

6. A taxpayer must keep records to prove the amount of the contributions made during the year. The kind of records that must be kept depends on the amount and type of the donation. For example, a taxpayer must keep a written record of any cash donation, regardless of the amount, in order to claim a deduction.  It can be a cancelled check, a letter from the organization, or a bank or payroll statement.  It should include the name of the charity, the date and the amount donated. A cell phone bill meets this requirement for text donations if it shows this same information.

7. To claim a deduction for donated cash or property of $250 or more, a taxpayer must have a written statement from the organization. It must show the amount of the donation and a description of any property given. It must also say whether the organization provided any goods or services in exchange for the gift.

For an indepth analysis of deductions for donations to U.S. charities (and the government’s policy encouraging or discouraging these donations), download my article at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2304044

If you are interested in discussing applying for the Master or Doctoral degree in the areas of financial planning or taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 


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IRS Changes Value of Charitable Contributions Made by Trusts

Posted by William Byrnes on November 12, 2010

IRS Form 1040X, 2005 revision

Image via Wikipedia

Charitable contributions offer an opportunity to do good in the community while reaping tax benefits, but the tax benefit of a charitable contribution can be jeopardized by poor planning.  Especially challenging can be the structuring of contributions by complex trusts as illustrated by the recently released IRS ruling, ILM 201042023. 

There, a trust’s charitable contribution deduction was limited to the trust’s basis in the property;  a deduction was not permitted for unrealized appreciation of the donated property.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the benefits of charitable giving, see Use Charitable Giving to Enhance Family Business Succession Planning (CC 10-76).

For in-depth analysis of the use of charitable giving in estate planning, see Advisor’s Main Library: F�Estate Planning Through Charitable Contributions.

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Proposals for Simplification of Life Insurance Policy Donation

Posted by William Byrnes on October 25, 2010

Valuing a donated life insurance policy can be tricky when taking a charitable contribution deduction. Detailed IRS guidance on insurance policy valuation has been confined to other scenarios, such as where a policy is sold or included in an estate.  Also complicating policy donation is the requirement that a qualified appraisal of the donated policy be included with the taxpayer’s return.

For in-depth analysis of the topic of charitable giving, see Advisor’s Main Library Section 1 F—Estate Planning Through Charitable Contributions

Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

We invite your questions and comments by posting them at AdvisorFYI, or by calling the Panel of Experts.


Posted in Estate Tax, Insurance | Tagged: , , , , , , , | Leave a Comment »

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