Dec 17, 2009

Help Donors Use IRS Year-End Charitable Giving Opportunities

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.