Your Master Tax Advisor
Tax law changes may affect your charitable
deductions
By Mei-Feng Moe
If you are like me, you are probably still "spring cleaning" which for me seems like an ongoing project that never gets
done. As you clean out your closets, kitchen cupboards or garage and gather your "stuff" to give to Goodwill, Salvation
Army, St. Vincent De Paul, or whichever you favorite charitable organization might be, keep in mind some tax changes
that may affect your charitable deductions.
Clothing and household items donated to charity after August 17, 2006, must be in good used condition. If you donate
bigger items such as furniture, appliances, electronics, or antiques, and the value of any single item is more than $500,
you may deduct the value of the item regardless of its condition, if you attach a qualified appraisal of the item with your tax
return.
If you donate a motor vehicle, boat or airplane, the deduction is usually limited to the gross proceeds from its sale
(unless the charity makes major improvements to it or keeps it for their own use.) If the value of the vehicle is more than
$500, you need to obtain a form 1098-C, or a similar statement from your charity and attach it to your tax return.
For monetary donations, the new laws require you to have a bank record or written communication from the charity
showing the name of the charity, the date and the amount of contribution. Your personal records such as bank registers,
diaries or notes made around the time of your donation, allowed by prior tax law are no longer sufficient to back your
deductions.
If your monetary donation is through payroll deductions, you should retain your pay stub, W-2 wage statement, 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. This provision applies to contributions made in taxable year beginning after August 17, 2006. For
calendar-year taxpayers, the new provision applies to contributions made beginning in 2007.
If you are an IRA owner, age 70 1/2 or older, an option to donate your IRA to an eligible charitable organization is
available in tax years 2006 and 2007. Up to $100,000 of otherwise-taxable distribution can be transferred tax-free and the
funds must be transferred directly by your IRA trustee to the eligible charity. Because the amounts transferred are not
taxable, there is no deduction on your tax return; that means you don't have to itemize in order to take advantage of this
new option for 2007.
As a reminder, if you make a single donation of $250 or more (either money or property), you are still required to obtain
a receipt from the charity. For donated "stuff" that's under $250, if possible, get a receipt from the charity that includes a
description of the donated property. If you leave your donations at a charity's unattended drop site, keep a written record
of the donation that includes a description of the property and its condition. Happy spring cleaning!
About the author
Mei-Feng Moe (May) is a Master Tax Advisor certified by H&R Block. In addition to giving tax advice and preparing tax
returns, she has also been teaching income tax courses for a number of years. She is an Enrolled Agent who may
represent clients before the IRS. She also holds series 6 and series 63 security licenses.
Tax Q &A
Q: My employer reimbursed me $30,000 for my tuition. Do I have to pay taxes on this reimbursement?
A: When you receive employer-provided educational assistance under a qualified program, you can exclude up to $5,250
(in a calendar year) from your income. The education does not even need to be job-related. If you received $30,000 a
year, the difference of $24,750 would be taxable to you and is included in your W-2, under box 1 as taxable wages.
If the amount over the $5,250 limit qualifies as a working condition fringe benefit, then it's not taxable to you and your
employer does not have to include the amount in your taxable wages. This means the education is required (either by
your employer, or by your profession) to maintain or improve your current job skills and the expenses would qualify you
for employee business expense deduction had you paid for it.
Send your questions to Mei-Feng Moe at dlc@triwest.net.