New Rules on Tax Deductions for Charitable Giving

It's income tax time, and everyone is scrambling to remember the rules for tax deductions and credits. And for the more charitable among us, it is time to add up what we've given to local charities, national causes and our religious congregations. And, while there aren't a lot of new rules for 2006, now is the time to plan for new rules for charitable giving that will govern tax deductions starting for this year.

Saving your receipts for charitable giving

Previously (this tax year included), any donation of less than $250 could be counted without a receipt. Many people could get around this by claiming donations of $249. This could be done as individual donations to the same charity, and no receipt would be required. Now, however, receipts are required for all donations. Even if it's only $1. And even if you make your donation in goods, you will need to get a receipt from the thrift store or organization reflecting the value of the goods. So, set up a folder for charitable giving receipts so that you have them available when tax season rolls around next year.

You can usually ask for a receipt at the time of donation. If you want to give to your local congregation, bypass the collection plate and instead talk to the leader of your congregation. Most will happily write out a receipt for you when you write a check. The Mormons have a rather interesting way of keeping track. Members fill out a slip with their names and the donation amount and give it with the donation. At the end of the year, the congregation leaders print out a list showing all of the donations made throughout the year and give it to the members in private. This serves as their receipts for donations.

Giving items in good condition

This is a new rule that applies for this tax year as well. Charitable donations of goods like furniture or clothing must be in good, usable condition. This is meant to cut down on the amount of rubbish that people give, just to get rid of it. While good, usable condition is subjective, you can get a little guidance on this score if you give to a local thrift store. The thrift store can be the judge of whether or not it is good enough to accept. And you will have to get a receipt for the value of your donation.

Charitable giving can not only help others, but it can also help you. When you give donations, you can take tax deductions for them, and this can lower the amount of income that you will be taxed on. It is important, however, to make sure that you save documentation of your charitable donations so that you can prove that everything is in order. Charitable donations are itemeized on Schedule A of Form 1040. If you take itemized deductions, you cannot take the standard deduction, so make sure that your charitable donations will help you reach a higher number than the the standard.