Give and grow rich with charitable deductions

The rules on 20% limits and 30% limits are complicated and convoluted. If you are giving to organizations other than those mentioned above, first consult with a tax adviser to determine whether these other ceilings will apply. Also, check Publication 526.

If you give more than 50% of your adjusted gross income to charity in one year, the excess is carried over for the next five years. Five-year carryovers are also available for the 20% and 30% limitation groups.

Other kinds of donations

If you contribute property owned for more than one year, the value of the deduction is normally equal to the property's fair market value.

You have an advantage when you contribute appreciated property because you get a deduction for the full fair market value of the property like real estate or stocks. You are not taxed on any of the appreciation. So, in effect, you receive a deduction for an amount that you never reported as income.

Contributing more than money

You should clearly contribute, rather than trash, old clothes, furniture and equipment that you no longer use. If you bring $1,000 in old clothes or furniture to Goodwill or the Salvation Army, make sure that you get a receipt.

Never throw such contributions into a bin where no receipt is available. I want you to picture the faces of dead presidents on that receipt. It represents real money in your pocket. If you are in the 25% bracket in 2008 and 2009, that receipt is worth $250 in tax savings to you. You would never leave a store without your change; likewise, never leave a contribution without a receipt.

Don't forget the mileage deduction for bringing the old clothes to the charity either. In 2008 and 2009, you can deduct 14 cents a mile for each mile you drive for charitable purposes. And if you're transporting a carload of cub scouts or using your car for any other charitable purpose, the mileage deduction is available.

Alternatively, you could deduct the actual costs of transportation, but you would need receipts to prove them. Unfortunately, you get no deduction for the value of services rendered to the charity or for charitable purposes.

New record-keeping requirements

Talking about receipts, there are new record-keeping requirements that began in 2007.

Now, you can not claim a cash contribution of any kind unless you have a bank record that supports it. That means you must keep a canceled check or a bank statement containing the name of the charity, the date, the amount or a written communication from the charity. That communication must include the charity's name, the date of the contribution and the amount.

If the contribution is to a religious organization solely for an intangible religious benefit (annual dues, for example) written proof is still required. All other contributions of cash require the charity to estimate the fair market value of any goods or services given to you in exchange for your contribution.

Moreover, any solicited quid pro quo contributions of more than $75 require the charity to tell you in writing how much is deductible. Eighty percent of the cost that many colleges now charge fans simply to have the right to purchase season tickets to their basketball or football games is deductible. That is because the government considers it a charitable donation to the financial institution. No amount paid for the purchase of tickets is deductible.

Lastly, you must have a written acknowledgement of any contribution of $250 or more from the organization. If you make multiple contributions of $250 or more, each must be acknowledged separately.

For more consult, Publication 526.

Remember, it's always better to give than receive. The glory of charitable donations is that you give and receive at the same time.

Updated Jan. 21, 2009

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