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IRS finalizes rules regarding charitable contributions

Recently the IRS issued final rules regarding the reporting and record-keeping requirements for deductible non-cash charitable contributions. There are different categories of mandatory documentation required for various amounts of contributions. Regardless of the value of the contribution, though, proof of its value is necessary, whether in the form of a hand-written note, a receipt or a qualified appraisal.

Following these documentation requirements can help you avoid having the IRS come asking questions, and they might even prevent you from being audited.

Donations under $250

These lower-level charitable contributions require the least amount of documentation. Usually, a self-written note with the approximate retail value of the contribution (what you’d get for the items at consignment or at a yard sale) is sufficient for these purposes. You could also get a receipt from the charity to whom the contribution is being made.

Between $250 and $500

Contributions of more than $250 but less than $500 still require much less stringent documentation than more expensive ones, but slightly more than the lowest valued ones. For these contributions, acknowledgement is required at the time of the gift, be it in the form of a note from the charitable organization or an official receipt.

Greater than $500 but under $5,000

This range of contribution requires not only the time-sensitive acknowledgement of the contribution, and they also have an addition tax reporting requirement; Form 8283 is necessary for any charitable gifts exceeding $500.

More than $5,000

As expected, deductible contributions of more than $5,000 come with the most stringent documentation requirements. To deduct these contributions, a taxpayer must provide acknowledgement from the charitable organization, Form 8283 (either Section A or Section B) and a “qualified appraisal.” For purposes of these contributions, a qualified appraisal is one performed by an appraiser with minimum education and experience credentials and regularly performs appraisals.

The rules for documenting and reporting non-cash charitable contributions can be confusing. A tax professional can provide more information about documentation requirements to ensure that valuable contributions are deductible come tax time.

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