Charitable Contributions

New law signed by President Bush in August of 2006, tightened the requirements for a taxpayer to substantiate the deduction taken on your form 1040, schedule A. With the signing of the Pension Protection Act of 2006, effective for contributions made after August 17, 2006, no deduction will be allowed for contributions of cash, check or other monetary gifts, regardless of the amount, unless the donor maintains one of the following records indicating the donee’s name and contribution date and amount:

A bank record
A receipt, letter or other written communication from the Donee

This new law will have an effect on the deductibility of the taxpayer’s out of pocket contributions.

The ways to assure the deductibility of your charitable contributions and substantiate your contributions are as follows.

Pay contributions by check
Pay contributions by credit card
Carry a receipt book with you and have donee sign the receipt for the amount of the contribution, most organizations are prepared to sign a receipt for the receipt of cash.
Have charitable contributions withheld for your pay and submitted by your employer, if your employer will allow this, your pay stub or W-2 showing the deduction will substantiate the deduction.

For Noncash donations of Clothing or Household items, effective August 17, 2006, a new phrase has been added to the requirement, “in good used condition or better”, all donations must meet these conditions or no deduction will be allowed. To claim a noncash deduction of more than $500 a form 8283 must be attached to the tax return and the taxpayer must keep the same record as required for cash contributions of less than $250.

For further information regarding the deductibility of charitable contributions, contact your tax preparer.