Charitable contributions can lower your taxes

In good economic times and in bad economic times, Americans give.  We do it because it makes us feel good — not because of the premiums and tchotchkes charities give in return,, according to research from Stanford Business School. Two thirds of us give money to charity (on average about $1,600 annually), and four in 10 Americans volunteer.  “Today” financial editor Jean Chatzky explains how you can get the biggest tax bang whatever you’re giving.

What are the basic rules for deducting cash contributions?
In order to write off your donations, you need to itemize and keep good records.  If a single gift is less than $250 you have several options: a canceled check, your checking account statement, a copy of your credit card bill if you put the deduction on plastic or a receipt from the charity.  If you give away $250 or more you need a letter or receipt from the non-profit.   Usually, you can only deduct contributions made through December 31 of each calendar year.  But this year, contributions made to Tsunami Relief organizations can be deducted through January 31.

What if the charity gives you something in exchange for your gift. like a ticket to a benefit? 
Then your deduction is limited to the donation minus the value of what you received. 

What about giving away old clothing and other property?
The rules with these items are a little less straightforward.  And this is where people tend to do themselves a disservice, by undervaluing the items they’re giving away or by not keeping receipts for, say, the old clothing they put in the Goodwill box.  Here are the rules:

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When you give away stuff, you can, in most cases, deduct its fair market value — that means the amount you could sell it for.  To value clothing and other household items like lamps, computers and sporting equipment, you can visit thrift shops or peruse auction sites like eBay, or you can use a software program called itsdeductible.com. 

As with cash gifts, record-keeping rules depend on the value. For gifts worth less than $250, no receipt is necessary if it’s impractical to get one.  Instead, you can keep a written record of the date, location and what you donated.  At $250 or above, you’ll need a receipt from the charity noting the name of the organization, the date and location of the contribution and a reasonably detailed description of the property.  Once you hit the $500 level, your records must include details of how you acquired the property, the date you got it, its original cost and any money spent maintaining it.  And for items worth over $5,000 you need an appraisal.

I know the rules changed on donating old cars to charity.  What if you gave away a car in 2004? 
If you gave away a car in 2004, then you squeezed in before the rules got tougher on consumers.  For cars given away in 2004, you can deduct the blue book value of the vehicle.  (If it’s a number higher than $5,000, you need a written appraisal.)  For cars given away in 2005 and later, you can only deduct the amount the charity was able to sell your used car for.  That’s a number that’s likely to be significantly smaller.

If I volunteer, can I take a charitable deduction for my time?
Unfortunately, you can’t.  Although according to Independent Sector, every hour you give is worth about $17.55, you can’t simply add them up and write them off. You can, however, deduct 14 cents per mile for the distance you travel back and forth to the charity and on its behalf, and any other expenses you incur like parking fees and tolls.  Keep records of whom you were working for and when.

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