Year-end holiday giving and cleaning tend to get people thinking about a little year-end tax planning, say extra tax breaks for charitable contributions. To count for the 2009 return, individuals and businesses must make their donations to a charity by Dec. 31.
But remember, the tax rules for those deductions have turned a bit more stingy. So if you're giving cash, cars or clothes, make certain to consider what will and what won't work next April.
Cash: You'll need a record.
It's not good enough to say you put a $5 bill in a Salvation Army red kettle or church basket. If you have no way to get a receipt for that cash, you're not entitled to a tax deduction, said Bob D. Scharin, senior tax analyst at the Tax & Accounting business of Thomson Reuters.
You could use a canceled check, a credit card statement, a written letter from the charity stating the amount and the date of the contribution or a pay stub if you're contributing weekly to a charity, say through payroll like the United Way.
For any single contribution of $250 or more in cash or property, you must have written acknowledgment from the organization to back up your claim.
If you paid $300 to attend a benefit dinner, Scharin noted, you could claim only $200 if the dinner was valued at $100.
Cars: Don't overstate value.
Mark Luscombe, principal analyst for CCH, a Wolters Kluwer business, said it's straightforward if you're donating a car to a charity and claiming a tax deduction of $500 or less. You would need the standard statement from the charity for a non-cash gift of $250 or more acknowledging the gift and a note that nothing was given in return.
Things get more complicated, though, if you're claiming a larger deduction for donating a car, a truck, a boat or an airplane to a charity.
Then, "as a general rule, your deduction is what the charity sold the car for," Luscombe said.
Was the charity really able to sell that car for $5,000?
You would need to get a Form 1098-C, or a similar statement, from the charitable organization and attach it to your 2009 tax return.
If you donated that car in late 2009, you still could claim it on the 2009 tax return even if you received the paperwork in January to outline the sale price of the car.
Was the vehicle repaired after you donated it and then sold for charity?
If you donate a car that's worth $400, but it's later improved and sold for $1,500, you're not going to be able to claim $1,500. Your claim would be $400.
Clothes: Don't give junk.
Donated clothing and household items - furniture, electronics, appliances and linens - must be in "good used condition or better."
If the thrift shop is selling shirts for $5, well, that $55 blouse that you donated is but a $5 tax deduction.
However, the IRS accepts a qualified appraisal in lieu of meeting the good used standard on household items for which a taxpayer claims a deduction of more than $500.
(c) 2009, Detroit Free Press.
Distributed by McClatchy-Tribune Information Services.