Charitable Contribution Changes

Added on 10/09/06

In August, 2006, Congress passed pension legislation and buried in that legislation were major changes in charitable contribution deductions.

Under the new tax act, contributions of used furniture and clothing have been targeted. The new act gives the IRS the authority to deny deductions for articles of used clothing that are of minimal value, such as underwear and socks. Generally, the law will make it more difficult to deduct the cost of donations of used clothing and furniture to charities like the Salvation Army and Goodwill. Until the IRS issues regulations, we will not know which articles will not be allowed as a deduction.

In addition, there is now a requirement in the law that in order to deduct a charitable contribution, your cancelled check or credit card statement is no longer proof that you made the contribution. In addition to your cancelled check or credit card statement, you will need a receipt from the church or charity or a log of your contributions.

Cash contributions are deductible with a log. The smart way to document your contributions is to write them on a calendar. Each year take a calendar and write the amount of any contribution that you make on the day you make it. Be sure to include the name of the church or charity. If you made the contribution in cash, write cash, if it was by check, write in the check number. This list, written on a calendar, will comply with the requirements of a contemporaneous log written into the new law.

Having prepared tax returns for over 50 years, it has been my experience, that the average taxpayer usually underestimates the amount of their contributions. The IRS and Congress, however, are convinced that the average taxpayer is overestimating his contributions. My suggestion is that you ask your Congressman why he is assuming that you are cheating on your charitable deductions, when in truth, you are probably not taking all of your allowable contributions.