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Coaches Corner
Accounting

Giving to Charity? Prove It or Lose Deduction

by Bob DiQuollo, CPA

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Get documentation, take pictures of your stuff before giving it away.

Donated property like clothing, furniture, electronics and appliances now must be in “good condition or better” to qualify for a deduction.  A receipt from a charity stating “3 boxes and 3 bags of clothing” won’t be adequate.  Provide a detailed list showing each item. Take pictures showing good condition.

You have to prove that property you donated to charity wasn’t junk—so your digital camera could be your best ally if you’re audited.

Besides a document from the charity, you must maintain information on how and when the property was acquired, its original cost, and its contribution value.  Without a detailed list, you’re sunk.

“Substantiate” even tiny donations
The new rules mean you must “substantiate” any cash charitable contribution of less than $250.  You’ll need either a bank record (a cancelled check or credit-card statement) or a receipt showing the name of organization and date and amount of the contribution.  There’s no wiggle room now.

If you put a $20 bill in the church collection plate every Sunday, you have to get and save a receipt for each contribution. But it’s not too late. You can still go back to the church for the receipts if you haven’t filed your return yet. Using checks instead avoids the problem.
 
Above $250 is stricter
If you gave away $250 or more at once (not in installments) a bank record alone won’t do. The charity must give you a letter or receipt showing the date and the amount of cash (or description of the property) you gave. It must say whether you received any goods or services in consideration for the gift, and, if you did, a description and estimate of their value.

You have to get this letter before you file your return.  If you haven’t gotten one yet, contact the charity now.

When a noncash contribution is greater than $500, you must file Form 8283 with your tax return and further describe of the items you contributed. For contributions of goods worth more than $5,000, you must obtain a written appraisal, and the Form 8283 must be signed by both the appraiser and the charity.  

Cars
You used to be able to donate your old car to a charity and deduct the book value. The book value is the amount that an auto dealer could get for the car.

Now, you can only deduct the amount of money the charity expects to get by selling the car—and that’s usually a lot less than book value.

If you claimed a deduction of more than $500 for your car, make sure the charity gives you a Form 1098-C (contributions of motor vehicles, boats, and airplanes). You must file this form with your federal tax return.

Charitable contributions of artwork, land, life insurance policies, collectibles, antiques, etc. may require additional substantiation and appraisals, and it’s a wise to consult with a tax professional first.

Bob DiQuollo is president of Brinton Eaton Wealth Management, a leading fee-only financial-planning, tax-advisory, and investment-management firm in Madison, N.J.  He is a Certified Financial Planner (CFP) a Certified Public Accountant (CPA) and a Personal Financial Specialist (PFS). He holds BS and MBA degrees from Seton Hall University and is a member of the Financial Planning Association (FPA), the National Association of Personal Financial Advisors (NAPFA) and the American Institute of Certified Public Accountants. For more information, please email diquollo@brintoneaton.com or visit www.brintoneaton.com.  

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