Est. 1964

Tips for Year-End Tax Savings

Thomas M. Affeldt

At Year’s End, the Holiday Season is an opportunity for spending time with family and good friends, to relax, and perhaps to prepare and plan for the next year. Giving to a charity not only helps those in need, but may also benefit you come tax time next year. Broadly speaking, you need to itemize your deductions to take advantage of a deduction for charitable giving, and we have provided the helpful tips below to assist you along the way.

Special Tax-Free Charitable Distributions for Certain IRA Owners

An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity. This option can be used for distributions from IRAs, regardless of whether the owners itemize their deductions.

To qualify, the funds must be transferred directly by the IRA trustee to the eligible charity. Distributed amounts may be excluded from the IRA owner’s income – resulting in lower taxable income for the IRA owner. However, if the IRA owner excludes the distribution from income, no charitable contribution deduction may be taken for the distributed amount.

Rules for Charitable Contributions of Clothing and Household Items

To be tax-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.

Donors must get a written acknowledgement from the charity for all gifts worth $250 or more that includes, among other things, a description of the items contributed. 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 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

If you have any questions regarding your charitable contributions or any other questions, please give us a call so that we may help you.

Thomas M. Affeldt

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Tulsa, OK 74119


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