Charitable Contributions

IRS laws regarding tax deductions for charitable contributions have been tightened. You can't give away an old dishwasher and expect to claim hundreds of dollars for it on your tax return. Learn what you can and can't claim and how the requirements will change in the very near future.

Charitable contributions are cash and non-cash giving that are directed to charities. Most people are familiar with deducting cash contributions to medical foundations and other non-profit organizations. Cash can be deducted for the actual dollar amount given. This includes tithing contributions to your church and other religious organizations.

The problem with charitable contributions comes with regard to non-cash donations. Each year people give away clothing, appliances, electronics, computers, artwork and even cars to charity. The amounts that they claim for these items are varied.

While you can't deduct the purchase price of the items if they are used, claims have been made for amounts that are certainly more than the items were worth at the time of donation. Large donations were not being substantiated with proof of the price. After 2008, however, all of that will change.

For now, if the contributions are in excess of $250 there has to be a receipt received from the charity verifying the amount. For property that's worth more than $5,000, a letter valuing the item is needed from a professional appraiser. The value of vehicles donated is limited to the amount that the charity receives from the sale of the property, not what you paid for it or the blue book value.

The purpose of charitable donations is to give to someone who could use what you no longer can. A good rule of thumb is to only give away items that are in the condition that you would want to receive. People have bundled up items and donated them even if they don't work or were tattered, and then claimed an almost new price on their tax return for the donation. This will no longer be tolerated.

Items that are given away have to meet certain standards. Clothing must be clean and in condition for wear by another. Appliances, computers, electronics, and the like must be in good working order and not in need of repairs. These items depreciate just like a car. The full price of a new item cannot be claimed for your donation of a computer that you have owned for ten years, for example.

To avoid any problems with your charitable deductions, obtain a receipt for each item that you donate. Specify the name of the item and how old it is. The amount of the deduction is further reduced for anything that has already been subject to a tax break such as business equipment. If you itemize, charitable deductions are limited to less than fifty percent of your adjusted gross income.