Inclined to give to charity ? The federal Pension Protection Act changed some of the rules in hopes of encouraging more giving and curbing abuses by a few charities and donors out to exploit charity tax breaks. Here are a few of the changes you may want to consider before making a gift or claiming a charitable tax deduction. CONSIDER THESE INCENTIVES... Donors may give up to $ 100, 000 a year to charity through direct payments from an individual retirement account, without paying income tax on the withdrawal. To qualify, the donor must be at least 70 1 / 2 years old. Tax-free distributions can be made to most charities, but not to private foundations, donor-advised funds and certain other restricted charities.
Businesses that give food to charity can continue to claim the enhanced tax deduction that Congress approved after Hurricane Katrina. Corporations that give books to public schools can also get the enhanced deductions put in place after Katrina. Donors giving easements or land to conservation charities or government agencies can write off more of the value: They can deduct up to 50 percent of their adjusted gross income and carry over excess value for 15 years instead of the usual five. That gives them a better chance of writing off the entire value of the gift. Farmers and ranchers are entitled to deduct up to 100 percent with a 15-year carryover.... BUT AVOID THESE PITFALLS Charitable deductions will not be allowed for gifts of clothing or household items unless they are in good condition. Food, art and jewelry are not subject to this standard. The IRS may deny a deduction for a gift of minimal value. If a donor claims a deduction of $ 500 or more for an item, and includes a qualified appraisal, the IRS will allow the deduction, no matter the condition of the item.
Taxpayers who give noncash property worth $ 5, 000 or more still need to get it appraised, but now they will face stiffer penalties if the appraisals are found to be grossly inflated. Hunters donating trophies can no longer claim the appraised value of that yak head; instead, they are limited to whatever they paid to have it stuffed or the fair-market value of the head, whichever is less. Donors who claim deductions for gifts of cash — even small sums — must retain canceled checks or receipts to prove their gifts. Previously, donors did not have to keep receipts or bank records for cash gifts under $ 250. SOURCES: The Internal Revenue Service; Ropes & Gray; summaries of the Pension Protection Act of 2006 issued by the House Committee on Ways and Means, the United Way of America and the Congressional Joint Committee on Taxation
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