The obvious question is how will the IRS know the condition of your donated goods? An auditor won't, but he or she will look closely at claims, and the law now gives examiners more leeway to ask questions if they see what they deem is an usually large charitable contribution amount on a Schedule A.
Vehicle donationsTax revenue lost to overvalued donations also was why lawmakers toughened vehicle donation rules.
You no longer can automatically deduct the Kelley Blue Book value of your donated jalopy. Instead, you must take into account the value of your auto, as well as what the charity does with it. The organization has to let you know how the vehicle was or is used and, if it was sold, at what price.
Most vehicular donations are autos, but these contribution rules also apply to boats, airplanes and other motorized vehicles. When you give a charitable group any of these machines, you'll need to file Form 1098-C with your tax return.
Often-overlooked giftsThere are several other tax-deductible ways to contribute.
You can write off the cost of gas and oil used in going to and from an organization at which you volunteer. If you prefer, rather than track actual costs, you can deduct 14 cents for each mile. You also can deduct travel expenses incurred while you were away from home performing services for a charitable group.
The cost of buying and cleaning uniforms used in volunteer work is deductible. So are some out-of-pocket expenses, such as stationery and stamps you purchased so that your favorite nonprofit could send out a mailing.
If you own appreciated stock that no longer fits your portfolio goals, consider giving it to a charity. Not only will you get to deduct the equity's value at the time it was donated, but also you will avoid capital gains on its appreciated value.
Contributions you can't deductYou already know that donations must be made to IRS-qualified groups to be deductible. The IRS also has some specific instances when giving isn't deductible. You cannot write off contributions to individuals, such as a fund to help a family experiencing hardship. Neither can you deduct the value of your time spent volunteering or services you provided the group at no cost.
Timing is everythingFinally, remember that your donations are deductible in the tax year in which you make them.
For example, if you pledged $500 to a charity in September but paid only $200 by Dec. 31, your deduction for that tax year is $200. You can deduct credit card charges and payments by check in the year they are made or mailed, even if you do not pay your credit card bill or your check doesn't clear your bank account until the following year.
Donations of goods, however, must be in the charity's possession by the end of the tax year.