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Bankrate's 2009 Tax Guide
Philanthropy
Even the IRS has a heart. Giving to charity can be a wise tax move, as long as you follow the rules.
 
Donations pay off for all
Charitable gifts pay off for all
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Now the IRS can deny deductions for items that are deemed of "minimal monetary value." When your total amount of donated articles (or as the IRS calls them, noncash gifts) exceeds $500, you have to file with your tax return Form 8283, Noncash Charitable Contributions, detailing your generosity. Taxpayers still can inflate the used property's value on the form, but with the new guidelines and charitable groups' reminders of it, lawmakers are hoping that individuals will follow the new rules. From the enforcement side, don't be surprised to find tax examiners taking closer looks at this form and asking more follow-up questions than usual.

The rest of the rules remain
From a tax standpoint, the key contribution consideration is just how much of a break your donations will produce.

The amount depends on how you file your taxes. Charitable contributions only help you at tax-filing time if you itemize deductions. That means you have to keep track of what you give and file the long Form 1040 and Schedule A.

If you opt instead to take the standard deduction when you file your return -- the choice made by most taxpayers -- your donations will still help the organizations you give to, but they won't help cut your tax bill. You can't add your donation totals to your standard deduction to increase that amount.

So how do you know whether you should itemize or claim the standard deduction? Start by finding out which standard deduction amount applies to you.

For 2008 returns, the standard deduction amounts are:

If you have enough deductions -- for example, your donations, plus mortgage interest, plus real estate taxes -- to exceed the standard amount, it generally makes good tax sense to itemize.

Tallying your tax benefit
OK, you've determined that itemizing is the way to go. Now it's time to tally your big-heartedness.

A nice thing about charitable contributions is that, unlike medical or miscellaneous deductions, there is no threshold amount to meet. You can give as little as $5 and still add it to the rest of your itemized deductions.

You're also not limited to monetary donations. You can give merchandise, appreciated assets, count the miles you drive for a worthy cause, even deduct part of the price of a ticket you purchased to attend a charity event.

But there are still a few IRS rules you must follow to make sure your contributions pay off at tax-filing time.

To be deductible, contributions must be made to qualified organizations. This is especially important when disasters prompt giving; too often, con artists use such tragedies to take your money and give nothing to those suffering. Organizations can tell you if they are qualified and if donations to them are deductible. You can also read the charity's literature to ensure that it is fully recognized by the IRS.

For complete peace of mind, check out the agency's online list (Publication 78) of exempt organizations or call the IRS toll-free at 877-829-5500 and ask about the group's tax status.

-- Updated: Jan. 5, 2009
 
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