There are many people and organizations in need today, so it's a good time to take a second look at your charitable donations for the year. Better still, bump up the giving and watch your 2009 tax bill shrink — but you'll need to donate before the year's end. Donations can take the form of cash, electronics, cars, jewelry, paintings, stocks, real estate or clothing.
Not surprisingly, there are some terms attached to your charitable deductions. Any donation of $250 or more requires a receipt as documentation. Property valued at more than $5,000 requires a written appraisal confirming its fair market value. There are also dollar limits: cash contributions cannot exceed 50% of adjusted gross income while property donations cannot top 30% of AGI. Contributions that exceed these limits can be carried over to the following tax year.
Donations that won't qualify for a deduction include contributions to political parties, individual people, labor unions, foreign governments and for-profit schools and hospitals. Also, contributions that get you a ticket to a charity ball, rock concert or other event can only be partially deducted. Basically, only the amount that exceeds the cost of the event can be written off. President Obama has proposals on the table to put further limits on deductions for charitable contributions as a means of raising cash to cover the country's swelling deficit, stimulus package and health care reforms. So, taxpayers may want to max out their charitable contributions this year while limits are still generous.
See tax moves to make before the year's end:
Introduction: Tax-Saving Tactics
Capture Stock-Market Losses
Gather Receipts — They're Precious
Reach for the Medical Deduction
Go Green for Tax Breaks
Prepare to Convert to a Roth IRA