CityView Magazine

IRS Tips for Charitable Contributions SMART WAYS TO CUT 401(k) Make it count To legally write off any cash contributions, no matter how small, you need a canceled check, bank record or a receipt with the charity’s name and the donation amount on it. Timing is key as the deadline approaches. You can only take the deduction for your contribution in the year that you make it. For example, if you charge the donation on a credit card this month, but don’t pay the bill until Jan. 2011, the write-off is good for 2010. Also, contributions must be made to qualified organizations to be deductible. You cannot deduct contributions made to specific individuals, political organizations and candidates. Volunteer services While you are scouring for deductions, don’t overlook any volunteer efforts. You can write off many out-of-pocket expenses you incur while donating your time, including what you pay for materials, supplies, uniforms, stationery, stamps, parking and tolls. While you can’t deduct the value of your time or services, you can deduct the cost of driving to and from your volunteer work, at a rate of 14 cents per mile. If you take public transportation, that bus or rail fare is deductible, too. Contributing household items Donating used goods such as clothing, electronics, appliances and furniture gets you a write-off for the item’s fair market value at the time you donated it. In order to take this deduction the goods must meet the criteria to be in good condition or better. To claim a deduction for contributions of cash or property equaling $250 or more you must obtain a written acknowledgement from the organization showing the amount of the cash and a description of the contributed property, and whether the organization provided any goods or services in exchange for the gift. If you claim a deduction of more than $500 for all contributed property, you must attach IRS Form 8293, to your return. Taxpayers donating an item or a group of similar items valued over $5,000 must complete Section B of Form 8293, which requires an appraisal by a qualified appraiser. To make sure you value your used things properly, you may, for example, need to make the rounds of thrift shops or secondhand furniture stores. The IRS has a helpful booklet on this subject, Publication 561: Determining the Value of Donated Property. YOUR 2010 TAX BILL – Switch your regular 401(k) to a Roth – Start a state-sponsored 529 college savings plan, earnings are completely tax free and you control the money. – Fund a Roth IRA for your child or grandchild and benefit from the long- term, tax free growth. – Second homes could mean a vacation from taxes. Property taxes can be written off and mortgage interest on the loan is deductable. – For medical deductions, don’t forget to include travel and lodging expenses incurred. – Buy a business vehicle. First-year write-off for most business cars is limited to $11,060, more if you buy a heavy SUV or pick-up truck. – Give yourself a raise – check your withholdings and file a new W4 if you are getting a large refund back annually. – Save energy and money. Big tax credits are yours for some appliance and home improvement purchases. – Does your company offer child-care reimbursement? Pay childcare bills with pre-tax dollars avoiding income and social security taxes. CityViewNC.com | 59

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