Discussion:New Charitable Contribution Substantiation
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Discussion Forum Index --> Tax Questions --> New Charitable Contribution Substantiation
| 17 August 2006 | |
| Kiplinger reports that as part of the new Pension tax bill Congress has added stricter substantiation requirements for charitable contributions.
MONEY: Effective 2007, to claim a deduction, a donor needs a cancelled check, bank record or a receipt from the charity listing the organizations name, date, and the amount of the contribution. A log or estimate is not sufficient. No longer can deduct that $10 bill you tossed in the Salvation Army bucket. GOODS. Effective on signing, donations of used clothing and household items limited. No deduction is allowed unless an item is in good condition or better or, if the item's value is over $500, an appraisal is supplied. IRS has been given the authority to deny any deduction for low value items such as socks and underwear. No details on what kind of a receipt is required. This should raise quite a bit of revenue from those who "overstate" and those who just don't keep good records. On the one hand I think this is a good move, but on the other hand I think about all of the bogus expenses Fortune 500 companies employer write off year in and year out. | |
| 17 August 2006 | |
| It seems very inequitable, though, to disallow a deduction to those people that do in fact pay cash out-of-pocket for charitable purposes. I hate to think that some otherwise charitable person might think twice before dropping that $10 into the salvation army bucket at christmas simply because now they have no substantiation for tax purposes. Oh well - I have a feeling many people aren't going to change either habit - giving the out-of-pocket cash or taking the deduction, which does in fact many times become an "estimate". | |
| 17 August 2006 | |
| Is there a definition of "household item"? What kind of household item (valued over $500) will need an appraisal? Will the household's car be subject to this (in addition to the other requirements for car donations)? | |
Death&Taxes (talk|edits) said: | 17 August 2006 |
| The more I look at new tax laws this year, the more I realize we are balancing the 15% dividend/cap gain rate on the backs of the middle class people who pay tax. First the Kiddie tax is prolonged, throwing years of tax planning down the toilet for some, and now this boon to the appraisers of America. My client B_____'s aunt died; her household goods were valued at $2000 for Inheritance Tax in Pennsylvania, based on her lawyer's estimate of value. She was the sole heir; she donated the contents of the house to a local charity, not for resale but to give to others less fortunate. Her tax saving will now go to the appraiser. My apologies if I seem intemperate; I don't mean to be that way. | |
| 17 August 2006 | |
| Pension Protection Act | |
| 20 August 2006 | |
| Is appraisal needed for only $500 items. How about bags of clothing and boxes of toys and household items all individually valued at less than $100 per item? If value totals $1000, must the t-shirts get appraised? | |
| 24 August 2006 | |
| The appraisal for total of one item over $500 is required only if they are not in "good" condition. As there will be no regs on "good", the Commissioner will be putting that burden on the charitable organization. | |
| August 24, 2006 | |
| I see nothing that places any burder on the charitable org. I'm pres of a rescue mission, and I'm waiting for some regs, and we're trying to figure out what this all means. Do we tell a donor, no, we cannot accept your junk...at the risk of ticking off our donors? Receive it and dispose of it, implying to the donor that since we took it, it must be ok...I wish these lawmakers would think of this stuff when they're deciding... | |
| 24 August 2006 | |
| There will be no regs. See link above on Pension Protection Act. Down toward the bottom. In one of the IRS emails, don't recall if was Guidwire or which one, it stated the Commissioner "will be working" with the non-profits. | |
| 26 February 2007 | |
I am confused with, --
"the item's value is over $500, an appraisal is required". Does that mean a single item valued at over $500 or does it mean one donation to Goodwill consisting of 6 bags of clothing and 6 boxes of household items totalling over $500? I read it to mean any single item valued at over $500. | |
Tinley tax (talk|edits) said: | 26 February 2007 |
| I've been doing a lot of reading in this area. I also checked with an associaion research department. I am of the oppinon that the $500 limit applies if a particular item is above $500 for one item an appraisal is required.
Really, this becomes the same rules that apply to a used car donation. | |
| 26 February 2007 | |
| So, the single donation of several boxes etc in good or better condition totalling $900 flys without an appraisal........ Is my thinking correct? Everyone always says their goods are in excellent condition. Usually grew out of the clothes.
The only time you would have to get an appraisal is if the item is not in good condition and the client wants to value it over $500. I don't see this happening, do you? | |
| 26 February 2007 | |
| Tin - different rules for vehicle donation and also a 1098C must be attached to the return. No appraisal required (assuming under 5K) and in general the deduction amount is the lesser of the fmv at time of donation or sales amount by the non-profit. | |
| 26 February 2007 | |
| Tinley:
Our posts hit at the same time. That is what I originally thought was that any single item valued at over $500 needs an appraisal. The example of the bags and boxes valued at $900. No appraisal needed as long as no individual item is valued over $500. Now is this thinking consistant with yours? | |
| 2 April 2007 | |
| I just got off the phone with a car ministry that received a vehicle from my client. They provided client a handwritten 'receipt' on letterhead. Most info needed for 1098C is there except lines 4, 5, and 6 indicating if the vehicle is sold and if it was sold, for how much. Client has given me a Kelly Blue Book of $1,710 printed off internet. I have a receipt showing that he paid $1,500 for it. Charity said over the phone that since they sold it for less than $500, my client doesn't need a 1098C. Am I wrong? I thought that if the charity sold it for far below FMV they were required to furnish a 1098C. As it stands, my client wont be able to claim the $1,500 he paid for it. | |
