Donation Tax Laws

Donation Tax Laws

Charitable Gifts Tax Breaks

Tax breaks for charitable gifts provide rewards for both donors and their favorite nonprofit groups. In 2006, however, lawmakers decided some taxpayers had been pushing the envelope a bit too far.

Clothing Donations

So beginning on Aug. 18, any donated clothing or household goods must be in good or better condition. If the IRS determines it's not, or in official terms finds the items were of "minimal monetary value," the IRS can disallow the deduction.

The change was prompted by IRS suspicion that many taxpayers claimed excessive value for items that should have gone to the garbage dump instead of the charity box. The groundwork for this change was laid a couple of years ago when the IRS clamped down on valuations of donated autos.

Donation Documentation

And in 2007, the IRS is getting tougher on donation documentation. Previously, you had to get a receipt or other acknowledgement from a charity if you donated $250 or more. Now, for a monetary gift of any amount, you've got to have "a financial record or a written communication" from the charity detailing the group's name and the date and amount of the gift.

A canceled check is fine. If you charge a contribution, your credit card statement should be sufficient. Many charities also already provide a receipt for all monetary gifts, regardless of the amount.

The most often asked question now, is: How do I account for the cash I drop in the church collection plate each week?

Make periodic pledges to your house of worship, usually larger donations on a quarterly basis. It might be easier to keep records that way.

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