Technology TransactionsThe New Rules Of Charitable Giving
Americans have a well-deserved reputation as a generous people. We support thousands of charitable organizations, and when disaster strikes, as it did on Sept. 11, 2001, our willingness to help others in need shines through.
To encourage philanthropy - and perhaps to say "thank you" for the support Americans give year-round - Congress passed laws to allow tax deductions for charitable contributions. In fact, you can take deductions on up to half of your adjusted gross income.
But as with all "gifts" from the Internal Revenue Service, this one has a raft of rules and regulations to go with it. Here are some things you need to know about making charitable contributions:
You can only deduct contributions to qualified organizations. The Better Business Bureau points out that "tax-exempt" and "tax-deductible" isn’t the same thing. An organization can be exempt from paying income taxes, but not meet the requirements for a charity. You can find out an organization"s tax-exempt status by:
Asking a representative of the group for a copy of its "Letter of Determination" from the IRS. That"s the formal notification that its tax status has been approved.
Calling your local office of the IRS.
Going to the public library and look in the reference section for IRS Publication 78. It lists most qualified organizations. If the library doesn"t have it, call 1-800-829-1040 and ask if the organization is listed.
Only certain kinds of organizations can receive tax-deductible contributions. According to the IRS, they include community chests, corporations, trusts, funds or foundations set up and run for religion, charity, education, science, literary, the prevention of cruelty to children or animals, and certain groups involved in national or international amateur sports.
War veterans" organizations also qualify, as do fraternal societies, such as lodges, if the donation is used for one of the above-mentioned purposes.
Donations to some nonprofit cemetery corporations are deductible, as are gifts to the U.S. government, a state or Indian tribal council government, as long as you make the donation for a public use, such as a park or a hospital.
Through treaties with Canada, Mexico, and Israel, you may be able to deduct contributions to eligible charities if you have income sources from those countries. Limits apply.
When it comes to tax deductions, time isn"t money. Many professionals donate countless hours performing tasks that would cost charities a fortune if they had to pay for them. But while your skill may be priceless in their eyes, it"s not worth a dime in the view of the IRS.
What you can deduct is money, real estate, property, securities, and anything you spend in the performance of your volunteer duties. If you buy a box of copier paper to run off an organization"s newsletter, you can write off the cost of the paper. You can also deduct a flat rate for mileage to and from the office supply store and to the organization"s office to drop it off - and the money you fed the parking meter while you were there.
If you benefit, it"s not a donation. Does your church or lodge have weekly bingo or raffles? They"re great fundraiser for a charity, but the bingo cards or raffle tickets you buy aren"t deductible donations because there"s a chance you could get something in return. It"s the same if a group has a silent auction and you have the winning bid of $500 on a week"s vacation at a condo on the beach. You might write the check to the organization, but since you would have paid $500 (or more) for that time at the beach anyway, it"s not deductible.
If you buy a ticket to a fund-raising dinner and the cost of the meal is $10 but the ticket is $50, you can deduct the difference between the actual cost of the food (your benefit) and the ticket price, or $40.
There are lots of other rules about deducting charitable contributions. For the best information, visit the IRS"s Web site at http://www.irs.ustreas.gov/prod/forms_pubs/pubs/p526toc.htm. For information on donating cars to charities, check out National Vehicle Donation Program at http://www.auto-donation.com. Always talk to your tax advisor about what you can and can"t deduct.