The holiday
season is upon us and so is the year-end deadline for making charitable
donations for 2009. Many people wait until the last minute to make their final
contributions for the year -- which can be nervewracking for nonprofits as they
compete for those last gifts.
One way to keep your relations with your donors
solid at this time is to understand the bigger tax picture, and do your part to
make sure they get all the tax benefits possible.
Whether it's
cash, stocks, clothing, or other property, the IRS rules for deducting
donations have changed over the last few years and gotten stricter. Here's what
you should know about the current rules for charitable giving.
- Clothing and household items. To be deductible, these items must be in "good
used condition or better." The IRS doesn't say what
constitutes "good used condition or better" but you can create guidelines
for what your organization will or won't accept, which are considered helpful in determining what the IRS might view as acceptable. If the
amount being claimed for a single item is over $500 and there is a
qualified appraisal, then this standard does not apply. You'll also need
to give the donor a receipt that includes your nonprofit's name, the date
of the contribution, and a written description of the donated property (but
not its value). Be sure you train your staff people about the importance
of these receipts and how to fill them out.
- Monetary donations. Under relatively new rules, donors must have a written record for all cash donations -- no matter how
small. For donations under $250, donors can use a bank record (such as a
cancelled check or credit card statement) or a written communication from
the nonprofit. That means, for example, that if you hold an event and pass
the hat, donors who make cash donations won't be able to claim a
deduction. They'll appreciate it if you remind them of the rules, and
recommend that they either use checks or see someone for a receipt. The receipt
must show the name of your nonprofit and the date and amount of the
contribution. For donations over $250, the long-standing requirement that
the donor obtain a written acknowledgment from the nonprofit with amount
and date of the contribution still applies.
- Certain IRA contributions. Under an IRS rule scheduled to expire at the end of 2009, donors age 70 ½ or older can make tax-free transfers from their individual retirement accounts (IRAs) to certain eligible nonprofits of up to $100,000 per year. The transfer must be made directly by the IRA trustee to the nonprofit and the amount transferred counts in determining whether the IRA owner has met his or her required minimum distribution for the year. The donor does not get a deduction for the amount transferred, but it is not taxed as it would be under normal rules.
For more information on charitable deductions and
IRS rules for nonprofits, see Every
Nonprofit's Tax Guide: How to Keep Your Tax-Exempt Status and Avoid IRS Problems,
by Stephen Fishman (Nolo) and IRS Offers
Tips for Year-End Donations on the IRS website at http://www.irs.gov/newsroom/article/0,,id=164997,00.html.
