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Charitable Giving as Seen by the IRS
by Rosemary White, Financial Planner |
The holiday season not only puts people in a
festive spirit, it can put them in a giving mood as well. But it seems one organization
often takes a more Scrooge-like approach to charitable contributions that seem designed to
circumvent tax liability: the Internal Revenue Service.
Taxpayers who itemize their deductions may deduct charitable contributions made to
qualified organizations. Even though only about one in four filers (individuals and
households) itemized their deductions in 1997, 82 percent of the $122 billion donated by
individuals to charity in that year was claimed as charitable contributions on tax
returns.
And the country has grown more generous, with contributions rising 12.9 percent in 1996,
14.2 percent in 1997, and 9.7 percent in 1998. According to the American Association of
Fund-Raising Counsel, the increases are driven by households that file itemized tax
returns.
These statistics aren’t meant to imply that people give to charity simply in return
for tax write-offs. But those who itemize their deductions may be tempted to deduct an
amount that “sounds about right.” Others may be tempted to try deducting
personal expenses or time donated to charitable activities, which is against IRS rules.
Keep in mind that the IRS imposes strict limits and requirements on charitable
contributions. For example, donations of less than $250 must be documented by a cancelled
check, receipt, or other reliable written record. A contribution of $250 or more must be
acknowledged in writing by the organization or with certain payroll deduction records.
Documentation of noncash contributions grows progressively more rigorous as gifts exceed
$250, $500, and $5,000. Noncash gifts of more than $5,000 generally require a qualified
appraisal. And only certain expenses and donations of cash or assets to qualified
organizations are tax deductible.
Many people consider charitable donations as a way to help others, not reduce their tax
burden. Whatever your intentions, it’s a good idea to make sure your charitable
giving strategies are in line with IRS rules.
Copyright, 2000, Strong Financial Group,
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