Your Taxes: Feeling charitable?
As I’ve said on many occasions, I admire the charitable spirit throughout Summit County. I think our residents are very generous with both their time and energy. While I think you should be charitable out of the goodness of your heart, not for financial gain, I also think you should take advantage of every tax deduction available to you. I’ve even suggested to clients who didn’t want to mix religion and taxes that they should take the money they saved by deducting the contributions and give those to their church. Why give more to Uncle Sam than necessary, when you can direct that money to the charity of your choice?The trick in saving money on charitable contributions is knowing what needs to be tracked for each type of contributions. I often have clients say “take the maximum!” Perhaps this was allowed before I entered the business, but there is no such “maximum” and it is the job of each taxpayer to accurately track their own contributions.In regard to cash contributions, gone are the days when you could drop $10 each week into the Sunday collection plate or claim amounts donated to the bell ringers outside the grocery store and take the deduction on your tax return. Beginning in 2007, only cash donations substantiated by a cancelled check or a receipt from the organization showing their name and the date and amount of the contribution are allowed. So, to make the most of donations, try to always pay by check. That way, even if the charity fails to send you a receipt at year-end, you have a record of your own. If cash is the only option, ask for a receipt at the time of the donation.Non-cash contributions, such as clothing donated to FIRC, are a bit more complicated. Beginning in 2006, the Pension Protection Act changed several laws regarding the deduction of non-cash donations to charity, such as clothing and household items. Only items that are considered in “good” used condition or better are allowed in your calculation of your deduction for charitable donations, unless you get a qualified appraisal. Same situation for contributions greater than $5,000: You must get an appraisal before you donate the items, otherwise you may lose out. Used cars have their own set of rules, so be sure to consult a professional before deciding to donate a car to charity.When it comes to recording your non-cash contributions, I suggest a three-step approach. I recommend collecting all the items you want to donate in a closet, the back of your car, or some other dedicated location. When it’s time to make the donation, the first step is to take a photo of your items. You don’t need to photograph each item individually, but take enough photos so that you can get a good sense of how many items are in your pile. The second step is to write a list of all items being donated. The list doesn’t need to list “woman shirt, white, size 6,” but, rather, “women’s shirts – quantity 10.” The third step is to assign a value to your list. On the downloads page of my website, http://www.cpamichele.com, I have a copy of the Salvation Army donation guide, which walks you through the process of valuing your donations. Once you have completed these three steps, drop your items off at your thrift store of choice and be sure to get a receipt. Store the photos, the list and the receipt together, and laugh your way to the bank at tax time!Michele Knight, owner of Knight Accounting & Technology, is a CPA and QuickBooks ProAdvisor based in Dillon. For more info and to contact her, visit http://www.cpamichele.com.
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