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Community Corner

Be Informed When Donating Money to Charity

Despite tough economic times, people are still donating money to charity. You need to understand the basic charitable gift tax laws if you want to take a charitable gift deduction on your income tax return.

Lisa, I give money to several charitable causes every year. I want to make sure that I am following the tax rules and can deduct these contributions on my income tax return. Can you give me any guidance?  Thank you, Douglas

Dear Douglas,

Foremost, in order to take an income tax deduction you must make sure that the charitable cause you are donating to is “qualified” with the IRS. There are many sham operations out there that are not qualified, and you cannot therefore deduct contributions made to them. The IRS maintains a list of organizations eligible to accept tax-deductible donations. You can find this list (called “Publication 78”) on the IRS website. While Publication 78 is usually reliable, you should also ask the organization for a copy of its “ruling” or “determination letter” from the IRS indicating that contributions to the organization are deductible.  

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If you contribute money, you must keep records pertaining to your contribution. In certain cases, a canceled check or other banking record may suffice. However, you often must obtain a written statement directly from the charity containing its full name, your name, the amount of your contribution and the date of your contribution.  Also, if you receive anything in return for your contribution (such as attendance at a dinner banquet), you may only deduct the amount that exceeds the value of the benefit you received. The rules are more complex when you donate property or assets (not money) and cannot be adequately covered in this short column.  

Douglas, thank you for your question. Although this column only covers elementary aspects of charitable gifting, I hope it has been helpful to you. Please consult with a CPA if you plan on making significant charitable donations, especially of property. There are special rules for donating cars, collectibles and certain other types of assets. Also, you may need to itemize your deductions rather than claiming the standard deduction.  

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Because I strongly believe that businesses should be socially responsible, I offer a one-hour consultation at no charge to you IF you donate a minimum of $25 to a charity of your choice.

If any reader would like to ask me a legal question, post it on the Lake Zurich Patch website or send your question to me at lehmanlawoffices@aol.com

Best Regards, Lisa

DISCLAIMER: Please be aware that this column provides only legal information of a general nature and is not intended as legal advice for any person, group of persons, or entity. You must always consult with an attorney with respect to your particular legal situation and circumstances.

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