Year-End Tips for Charitable Giving

As the end of the year approaches, and individuals begin making donations to certain 501(c)(3) charities, here are four (4) tips that need to be considered:

1. IRA Distributions to a Charity

IRA owners above the age of 70½ can directly transfer (tax-free) up to $100,000 in IRA distributions to an eligible charity. Any amount so transferred is not taxable, but no deduction is available on your income tax return.

This is a great tip if you are forced to a take a Required Minimum Distribution (“RMD”) from your IRA, which would then force you into a higher tax bracket.

2. Deductions on Household Items and Clothing

Household Items (e.g., furniture, electronics, appliances, and linens) and Clothing that an individual donates to a charity and deducts from their income tax return must be in “good used condition or better.”

If you are donating over $500 in such items, and plan on taking a deduction for such donation, then you must attached a qualified appraisal of the item(s) with your income tax return.

3. Money Donations

Any monetary deduction taken on your income tax return must be accompanied by a bank record or written communication from the charity illustrating the contribution.

Any income tax return claiming a monetary donation over $250 must contain an acknowledgement from the charity that said donation was made.

4. Deduction in the Year the Donation Was Made

Contributions are deductible in the year they are made…not in the year in which they are paid. As such, if you pledge a $500 deduction in 2011 on your credit card, but don’t pay said credit card until 2012, then the deduction must be made for the year 2011.

For more information on charitable deductions, please visit the I.R.S. Publication 526, on its website at http://www.irs.gov/pub/irs-pdf/p526.pdf.