Wednesday, October 31, 2007

Getting ready for the Income Tax Time

Rules for Clothing and Household Items.
To be deductible, clothing and household items donated to charity after Aug. 17, 2006, must be in good used condition or better. However, a taxpayer may claim a deduction of more than $500 for any single item, regardless of its condition, if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances, and linens.

Guidelines for Monetary Donations
To deduct any charitable donation of money, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. A bank record includes canceled checks, bank or credit union statements and credit card statements. Bank or credit union statements should show the name of the charity and the date and amount paid. Credit card statements should show the name of the charity and the transaction posting date.

Money donations may be made with cash, check, electronic transfer, credit card or payroll deductions. For payroll deductions, the taxpayer should retain a pay stub, 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.

Previously, taxpayers could document their donations of money with personal bank registers, diaries or notes — but these records are no longer sufficient for contributions made in taxable years beginning after Aug. 17, 2006.

A taxpayer must still get an acknowledgement from a charity for each deductible donation (either money or property) of $250 or more.

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