2011 Year End Charitable Giving - Tax Rules to Consider

Now that we are in the last quarter of 2011, many of you are thinking about tax planning. As part of this process, charitable giving should be considered. Some IRS rules to consider:

Make sure the charitable organization qualifies. Ask them or check IRS publication 78, Cumulative List of Organizations. It is available at www.irs.gov.

Charitable contributions are deductible only if you itemize deductions.

You can generally deduct cash contributions and the fair market value of most property you donate to a qualified organization. Several rules apply to donations of property, including clothing or household goods, cars and boats.

If your contribution entitles you to receive merchandise, goods or services in return you can only deduct the amount that exceeds the fair market value of the benefit received.

Starting in 2007, the recordkeeping requirements became tougher. To deduct cash contributions, you must have either a cancelled check, bank or credit card statement, payroll deduction pay stub or a written statement from the organization containing their name, date and contribution amount. For a cash contribution in excess of $250, you need a written acknowledgement from the organization which includes the amount of cash contributed and whether the organization provided any goods or services in exchange for the donation.

Consider the donation of stock. There are several rules regarding this, but if the stock has been held more than one year and it has appreciated, you may be able to deduct the fair market value of the stock and not recognize the capital gain income. If the stock has fallen in value, sell the stock to claim the capital loss and donate the proceeds to generate a contribution deduction.

Donations made near the end of the year by credit card are deductible even if you do not pay the credit card company until the next year.

If non-cash donations do not exceed $500, a value is listed on your tax return.

If the total of non-cash donations exceed $500 and do not exceed $5000, then additional information is required: donation receipt, charity address, age of the donated property, original cost, how it was acquired, and a description on how the value was determined.

Over $5000 per item or group of related items requires an appraiser and the charity to sign a form that is attached to your tax return. Please contact your tax preparer before making such a large donation to make sure all the requirements needed to be done ahead of time are understood.

There are more restrictive rules in regards to the donation of your car or boat, which should also be discussed with your tax preparer before the donation is made.

Arizona has some wonderful charitable tax credits to take advantage of. These credits allow for a federal charitable deduction and a state tax credit, which is a dollar for dollar reduction of your state tax.

Private school tuition organizations, working poor credit, public school credit and military family relief fund credit.

Charitable donations should always play a role in year-end tax planning. Know the rules and enjoy the pleasure of giving.