IRS Tips for Charity Giving

Rules for Clothing To be deductible, clothing and household items donated to charity generally must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances and linens. Guidelines for Monetary Donations To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date. Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity. These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements. Reminders To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders: Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2012 count for 2012. This is true even if the credit card bill isn’t paid until 2013. Also, checks count for 2012 as long as they are mailed in 2012. Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. Exempt Organization Select Check, a searchable online database available on IRS.gov, lists most organizations that are qualified to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in the database. For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2012 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction. For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more. The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return. If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return. And, as always it’s important to keep good records and receipts.

Proposition 30 - Governor’s tax increase measure – Passed

This measure is intended to provide temporary taxes to fund education and local public safety. Proposition 30 raises the sales/use tax rate by 1⁄4 cent for four years from January 1, 2013 through December 31, 2016. It also includes higher personal income tax (PIT) rates that will be raised for seven years effective January 1, 2012. The rates for high-income individuals will be: • 10.3% for singles making $250 – 300,000 • 11.3% for singles making $300 – 500,000 • 12.3% for singles making over $500,000 The additional marginal tax rates increase as taxable income increases. For joint filers, an additional 1 percent marginal tax rate is imposed on income between $500,000 and $600,000 per year, making the total rate 10.3 percent. Similarly, an additional 2 percent marginal tax rate is imposed on income between $600,000 and $1 million, and an ad- ditional 3 percent marginal tax rate is imposed on income above $1 million, increasing the total rates on these income brackets to 11.3 percent and 12.3 percent, respectively. These new tax rates affect about 1 percent of California PIT filers. These taxpayers currently pay about 40 percent of state personal income taxes. The tax rates will be in effect for seven years from January 1, 2012 through December 31, 2018