In a news release, IRS has reminded individuals and businesses making year-end charitable contributions of several important tax law provisions and general substantiation requirements that they should keep in mind. IRS also emphasized one special tax break—allowing direct contributions from IRAs—that is currently scheduled to expire at the end of the year.
Charitable Contribution Tips
Special charitable contributions for certain IRA owners. An IRA owner, age 70 1/2 or over, can directly transfer tax-free up to $100,000 per year to an eligible charitable organization. This provision, currently scheduled to expire at the end of this year, is available to eligible IRA owners 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.
In the release, the IRS offered these additional reminders:
- Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the year count for 2013 even if the credit card bill isn’t paid until next year, and checks count for 2013 as long as they are mailed before the end of the year.
- Only donations to qualified organizations are tax-deductible. IRS maintains a searchable online database (Exempt Organization Select Check, available at www.irs.gov) listing most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even though they often are not listed in the database.
- For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. Thus, individuals who choose the standard deduction, including anyone who files a short form (i.e., Form 1040A or 1040EZ) is ineligible to claim the deduction.
- For all donations of property, including clothing and household items, the taxpayer should 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, the taxpayer should 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.
- 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.
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.