12 Tips for Year End Charitable Giving

A few years back, Kelly Phillips Erb of Forbes  wrote a great article on how to get your biggest bang for your year end charitable donation. Here is an excerpt from her article.


In the tradition of tax years past, it’s the season to talk about charitable contributions!

Charitable donations are an excellent way to reduce your tax burden for the year, all while doing something for the greater good. But as with everything in tax law, there are procedures and rules that need to be followed. Here are 12 tips for making sure that you get the best bang for your holiday bucks:

    1. You must itemize in order to claim a charitable deduction. You report itemized deductions on Schedule A on your federal form 1040 using lines 16-19:
  1. Only donations to qualified charitable organizations are deductible. If you’re not sure whether an organization is qualified, ask to see their letter from the IRS (many organizations will actually post their letters on their web site). If that isn’t possible, you can search directly online using IRS Publication 78. Keep in mind that churches, synagogues, temples and mosques are considered de facto charitable organizations and are eligible to receive deductible donations even if they’re not on the list (some exceptions apply so be sure and ask if you’re not sure). I would also suggest that you check out a potential charitable organization before you make a donation: Charity Navigator is a great site to gather information.
  2. Cash deductions, regardless of the amount, must be substantiated by a bank record (such as a canceled check or credit card receipt, clearly annotated with the name of the charity) or in writing from the organization. The writing must include the date, the amount and the organization that received the donation.
  3. Cash deductions that are not substantiated, such as a cash donation without a receipt, or donations made directly to an individual rather than a qualified charitable organization will be disallowed. That includes paying for someone else’s Christmas presents or lending a helping hand like these donors did at K-Marts around the country (read the story, tissue in hand). This doesn’t mean that you shouldn’t do these random acts of kindness – in fact, I would argue just the opposite – but it does mean that you can’t claim the deduction on your tax return.
  4. If you have money taken out of your paycheck for charity, be sure to keep a pay stub, a form W-2 or other document furnished by your employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
  5. For 2011 only (unless Congress extends it and, er, I wouldn’t count on it), an IRA owner who has reached the age of 70½ or older can make a direct transfer of up to $100,000 per year to an eligible charity, tax free. This means that amounts directly transferred to the charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution (RMB) but will not be considered a taxable withdrawal. Nice, right? Some restrictions apply including the fact that distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.

For the rest of Kelly’s tips please read the rest of her article at Forbes.com.