Religious organizations.
Entities operated for religious purposes can receive payments for pew rents,
assessments and dues. (See “ Tax
Reporting for Houses of Worship,” JofA,
May06, page 71.)Sweet Charity
While your clients may not be Warren Buffetts donating billions to charity, you can help them maximize their deductions and better the world at the same time. Generally speaking, tax-deductible charitable gifts must go to a domestic nonprofit organization, trust, community chest, fund or foundation. Here’s a list of the types of charities and deductions the IRS finds acceptable.
CHARITIES
Religious organizations.
Entities operated for religious purposes can receive payments for pew rents,
assessments and dues. (See “ Tax
Reporting for Houses of Worship,” JofA,
May06, page 71.)
Charitable organizations.
Groups that exist for charitable purposes, such as
the American Red Cross, the Boy Scouts and Girl Scouts of America, the American
Cancer Society, the United Way, the Salvation Army and the YMCA or YWCA.
Educational organizations.
Groups organized for scientific, literary or
educational purposes, including hospitals, research organizations, colleges and
universities.
Government organizations.
Gifts for public purposes to the Social Security
System, local fire departments or civil defense groups or committees formed to
raise funds for developing a public park are all allowable deductions.
Other qualified organizations.
Associations established to promote education,
combat crime or aid public welfare, groups dedicated to the prevention of
cruelty to children or animals and corporations established to provide legal
services to the needy in noncriminal proceedings.
Note: You can check an organization’s status at www.irs.gov/charities/charitable.
ALLOWABLE DEDUCTIONS
Out-of-pocket expenses.
The costs related to volunteer work, such as phone calls,
postage and travel expenses.
Transportation costs.
When using their own cars to travel to and from
commitments, volunteers can deduct either a flat rate of 14 cents a mile or the
actual operating costs.
Incidental expenses.
Unreimbursed postage, the cost of stationery and other
business supplies, telephone charges, the purchase price and cleaning bills for
required volunteer uniforms that are worn only for that purpose—even the
ingredients used to make something for a bake sale—may qualify. Federal tax law
generally allows a deduction of up to 50% of adjusted gross income (AGI) for
such expenses.
Cash contributions.
To encourage monetary donations, federal tax law generally
allows taxpayers to make deductible cash contributions of up to 50% of AGI.
"As a general rule, tax deductions for charitable contributions must be
substantiated by canceled checks or receipts from the charity. In the past, a
log or other written record sufficed when cancelled checks or receipts were not
readily available. So, for example, if you dropped a $20 bill in the Sunday
collection plate or in a Christmas kettle outside of a department store, you
could still claim a tax deduction as long as you kept a record of the donation.
The new law eliminates this option starting in 2007. It does not matter
if a cash donation is fifty cents or $1000. To be deductible, the cash
donation must be substantiated by a bank record or written communication from
the charity" (ITFP's
Charitable Contriburtions Rules).
Personal property.
That desk, bookcase, computer or appliance gathering dust
in the attic or basement can make an ideal donation—and deduction. Other
personal property, such as books or old clothing in good condition, can be
donated as well. So can artwork, collectibles and assets such as real estate,
stocks and bonds. These deductions generally may not exceed 30% of AGI.
Source: Adapted from “Charitable Contributions: An Overview of the Deduction” by Jeremiah K. Murphy, CPA,
www.jkmcpa.com.Journal of Accountancy October 2006
IRS Circular 230 Disclosure: To ensure compliance with U.S. Treasury Regulations governing tax practice, we inform you that, unless expressly indicated otherwise, any federal tax advice contained in this communication (including attachments) was not written to be used for and cannot be used for (i) purposes of avoiding any tax-related penalties that may be imposed under Federal tax laws, or (ii) the promotion, marketing, or recommending to another party of any tax-related transaction or matter addressed herein.