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A Look at the Tougher Charitable Tax Laws in the US

Starting in 2006, the United States government and its Internal Revenue Service began to toughen up when it comes to charitable tax breaks. New, stricter charitable tax policies have come into effect. Are you ready? Here is a brief overview of the most prominent changes to the charitable giving tax code that have recently come into effect.

Claiming Tax Breaks on Used Items. This is perhaps one of the most prominent changes made to the charitable giving tax code. It used to be that you could donate a big box of clothing to Goodwill and then you could deduct the items on your tax return. This is no longer the case—sort of. The newer tax code specifies that all clothing and items donated that you want to deduct from your tax return must be in good used condition or better. That is, the items must have some kind of real monetary value. So, it seems that you will no longer be able to claim a deduction by donating worn out clothes with little to no monetary value. However, this new clause comes with a big exception. You are allowed, according to the new tax code on charitable donation of used items, to deduct $500 or more on a donated item or clothing if you include along with your tax return a qualified appraisal for the donated item or items.

What can you do if you think you may want to deduct donated items to charity? Your best bet to avoid future hassle is to keep very good records. Take pictures of the item or items that you have donated. Make a detailed list of what you donated, and to whom, as well. Make sure you include some kind of qualified appraisal if you are indeed planning to deduct $500 or more.

If you are having trouble with appraising certain items, check out the helpful Salvation Army or Goodwill Industries valuation guides. These are helpful guides that can help you find the approximate going rate for the items you are planning to donate. These guides may be available at the web sites of these organizations. Also, you will want to keep all of your receipts. You will also want to file IRS Form 8283 for non-cash gifts that are greater than $500.

The Stricter New Tax Rules on Donated Vehicles

Another area that has received a bit of tightening from the IRS has to do in the realm of donated cars and other vehicles. The American Jobs Creation Act of 2004 put into place stricter rules when it comes to donating a car, airplane or boat to the charity of your choice. In general, the new law states that the amount you can deduct must directly correlate with the use of the auto, boat, or airplane that you have donated. That is, if the charitable organization that you donate your property to uses the boat, car, or airplane significantly, or makes significant material improvements to it, you will be allowed to deduct full market value of the car, boat or airplane that you have donated.

These new rules also make it considerably more difficult when it comes to donating a car or any other kind of vehicle for which you want to deduct $500 or more. If you wish to claim a deduction of $500 or more, you must provide written acknowledgment from the charitable organization you have donated to.

However, not all charitable tax laws got stricter this time around. Older philanthropists, for instance, got a bit of a break when it comes to making charitable giving easier. Now, philanthropists older than 70 ½ years old can transfer money directly from their IRA accounts to the charitable organization of their choice.