Year-End Gifting Rules

The Internal Revenue Service wants to remind individual taxpayers and corporations about the rules regarding charitable contributions as everyone gets ready for the end of the tax year. Many people donate items, money and property towards the end of the year to claim tax deductions by the filing deadline in mid-April.

Accounting Today's Jeff Stimpson writes that the IRS rules about year-end gifting have changed in the past few years. Charitable contributions of clothing and household items must be in good condition or better to be deductible. Someone who claims a deduction of $500 or more for a single donation does not have to meet the "good or better" standard if the item is appraised and the appraisal accompanies the tax return. Household items include furniture, appliances and electronics. Donors must get a written receipt for items of $250 or more with a written description of the items donated.

Monetary gifts must have a bank record or a written receipt from an organization to be valid as charitable contributions. Records, whether from the bank or the organization, must indicate the name of the charity, the date of the gift and the amount donated. Money can be in the form of cash, a check, a wire transfer, payroll deduction, or credit card or debit card transactions. As in past years, any amount more than $250 must have the acknowledgement of the charity.

Only donations to groups registered with the IRS count towards tax deductions for charitable contributions. Taxpayers can use the agency's Select Check tool to find out if the charity is registered. Religious organizations such as synagogues, temples, churches and mosques count as eligible groups even if they do not show up on the IRS database. Donations to government agencies are automatically included as valid organizations.

Special rules apply for donated vehicles, such as cars, boats and airplanes. The deduction normally includes the gross proceeds of the sale of the vehicle if the sale price is $500 or more. Form 1098-C must accompany a tax return for this type of donation.

Year-end charitable contributions must be dated, completed or mailed before December 31 to count on that year's tax filing. Even if a credit card bill is paid in January, if the date of the transaction is the previous December, that contribution counts towards the previous year.

These rules are all part of the complicated IRS tax code that changes on a yearly basis. Politicians have upwards of 300 tax code reform priorities, and taxpayers must worry about Affordable Care Act penalties before they file in April. Taxpayers take advantage of thousands of items for charitable deductions and lower their tax bill every year. Attach Schedule A to the Form 1040 to claim and document itemized deductions.

Year-end gift giving is a quick way to reduce tax bills before the filing season begins. Charitable contributions benefit taxpayers, and groups become less dependent on government assistance thanks to donations.

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