Charitable Deductions

I’m blogging from downtown Denver, Colorado.  I’m here for the National Cattlemen’s Beef Association (“NCBA”) Annual Convention and Trade Show.  I came across an article last night by the Ohio agriculture law firm of Barrett, Easterday, Cunningham & Eselgroth, LLP regarding charitable deductions.  Since tax-time is around the corner, I thought it would be appropriate to post a few reminders from the Barrett Easterday article from its December 2010 firm newsletter:

1.  In order for charitable contributions to be tax deductible, the donation must be made to a qualified organization.  You can find a list of most qualified organizations here.  Furthermore, you must itemize your charitable deductions using a Form 1040 on Schedule A.

2.  You can usually deduct cash contributions and the fair market value of property donated to qualified organizations.  I really enjoyed this blog by TaxGirl about donating clothing to Goodwill.

3.  If you receive merchandise, goods, or services, then you can only deduct the amount that exceeds the fair market value of the benefit received.  To illustrate, I am a runner and enjoy participating in charity races with the New York Road Runners.  If I pay $18 to run in a race and receive a T-shirt, my charitable donation might only be around $10.  Your receipt should list the amount that is tax deductible.

4.  Keep accurate records of your charitable contributions!  Though it might be easy to throw in cash into a church offering plate, without written records of the charitable donation then you won’t be able to claim the tax deduction. Develop a record system that works for you.  Since I’m a Mac, I use Bento to keep track of my charitable contributions because it synchs with my iPhone.  If you make a contribution of over $250, it is recommended that you obtain a written acknowledgment from the organization to verify the donation.

5.  Only those contributions actually paid in the 2010 tax year are deductible.  If you pledged to pay $500 to a qualified charity over a 10 month period but only paid three installments in 2010, then only $150 is tax deductible for 2010.  Contributions made via credit card are “paid” when the transaction took place (i.e., the date that you incurred the liability) instead of the date that you actually paid your credit card bill.

6.  Unfortunately, your time donated to charitable organizations is not tax deductible.  But don’t forget that your mileage is deductible.

So you weren’t organized with your record keeping in 2010?  That’s okay.  2011 is a fresh year.  Get yourself a pretty hanging folder and a clean excel spreadsheet to keep accurate detail for the next taxable year.  I’m a big believer in being completely truthful with Uncle Sam on the income you earn, but to also aggressively take advantage of tax deductions.  I also recommend finding an accountant that you trust.