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TaxTalk From the NASE's TaxTalk Consultants Give Wisely And Get The Tax Deduction 'Tis the season to give. But just exactly how much of those charitable contributions can you deduct from your taxes? Ed Slott has the answer to that and many more taxing concerns in his book Your Tax Questions Answered (1998, softcover, 220 pages, $11.95, Plymouth Press, 101 Panton Rd., Vergennes, VT 05491, 800-350-1007). Slott, a CPA and nationally-recognized tax expert with more than 20 years of experience, organized the book in a readable question-and-answer format that addresses all aspects of your tax life -- from business to family. Here, excerpted from his book, is timely guidance for getting the tax deductions you deserve on charitable contributions. Q: Can I get a deduction for the value of my time or the services that I donate to charitable organizations? A: No. But you can take a deduction for non-reimbursed out-of-pocket expenses, like supplies you bought for the group, coffee or food for charity functions, or items such as awards which you bought for a religious, educational, or other charitable group affair or meeting. You cannot take a deduction for personal, living or family expenses. Q: How do I know if an organization is a “qualified charity” and registered with the IRS? A: You can go to your local library and look it up in IRS Publication 78, “Cumulative List of Organizations,” which lists most qualified organizations and is regularly updated. Recognized religious organizations do not have to apply. This information is also available at the IRS Web site, www.irs.ustreas.gov. You can also call the IRS toll-free in your area. Q: What are all these year-end forms I’m receiving from organizations I donated money to during the year? Is this something new? A: This started in 1994. Here are the substantiation requirements for claiming charitable deductions. You need more than canceled checks to substantiate certain contributions and/or gifts. For a charitable contribution of $250 or more to be considered an acceptable tax deduction, you must obtain from the charity written substantiation (a receipt or statement) which reports the amount of the contribution, the value of the goods or services received in exchange for the contribution (such as a dinner or a gift), and, in the case of a non-cash contribution, a description of the donated property. Separate payments generally will be treated as separate contributions and do not have to be combined to reach the $250 threshold, even if in total they exceed $250. So, if you made five separate donations of $200 each on five different days, the $250 substantiation rules do not apply, even though your total contribution to the organization is in excess of $250. When a contribution exceeds $75, but you receive goods and services in return, the charity must provide you with a good faith estimate of the value of the goods and services received in order to keep you from claiming that portion as a charitable contribution. Let’s say you pay $100 to the charity to attend a special dinner event. If the dinner is worth $40, then your actual deduction is limited to $60. The charity must provide you with a statement giving you its estimate of the value of the dinner. However, this can get tricky. Let’s say you pay $10,000 to a charity for the privilege of having dinner with Barbra Streisand. It’s going to be tough for the charity to put a value on the amount of time Streisand spent with you. But this has to be done to figure out the actual net value of the deductible contribution. Q: How much can I deduct for contributions? A: As much as you want. There’s no “magic” maximum amount that you can deduct for charitable contributions. There is a limitation, but it rarely comes into effect for cash contributions. You can only deduct up to one-half of your Adjusted Gross Income (AGI) in a given year. Any excess can be carried over to the following year or years. For contributions of capital gain property, such as stock, you’re limited to 30 percent of your AGI.
Smart Charity Want to be sure the charitable organizations you support make good use of your financial contributions? Then hook up with the National Charities Information Bureau (NCIB), the philanthropic advisory service of the Council of Better Business Bureaus. The NCIB offers a free “Wise Giving Guide” that identifies more than 300 national charities -- both those that meet NCIB’s criteria and those that aren’t fully accountable to contributors. You can access the guide on the Web at www.give.org. Or call (212) 929-6300 to request your free copy of the “Wise Giving Guide.”
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