New Rules on Cash Donations to Charities

Tax Tips

In case you missed it, the President signed the new Pension Protection Act on August 17th.  Most of the 400 pages of the Act deal with the under funding of pensions. However, if you keep paging through to page 301, you will see a section titled: Modification of Recordkeeping Requirements for Certain Charitable Contributions. Yes, that has nothing to do with pensions but it does affect the charitable contributions that you deduct on your tax return.

Do you drop some cash into the church basket every week? And keep a logbook of the amount given each week? Then at tax time, add up the amounts in the log book and deduct those totals on your tax return?  That’s ok for your 2006 tax return as long as a cash donation is not $250 or more. (For 2006, if the donation is $250 or more, you need to have a receipt from the charity).

However, come January 2007, throw away your logbook and get out your checkbook!

Starting in 2007, you must have a cancelled check, credit card statement, or a written receipt from the charity in order to deduct any donation.  The IRS will not allow the deduction, even if it is only $1 or $2, if you don’t have this documentation.

If you give cash and get a receipt from the charity, be sure the paperwork has the charity’s name and the date and amount of the donation.

You won’t have to attach the cancelled checks or receipts to your tax return but be sure to keep the documentation in case of an IRS audit.

The Pension Protection Act did not change the following IRS rules:  Charitable contributions are still only deductible if you itemize deductions on Schedule A and the contributions must be made to qualified organizations.

That’s the latest news on cash contributions to charities!


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