I’ve taken a look at the IRS rules regarding deduction charitable donations in the past and they’re pretty straight forward. The only real change to what was written in the past was the keeping of receipts for cash donations. With the passage of the Pension Protection Act, which mostly governed pensions and ensuring they were adequately funded, came new charitable donation rules for the 2007 tax year.
Big Change for 2007
Starting in January of 2007, you can only deduct cash donations if you have proof: canceled check, credit card statement, or a written receipt from the charity itself. For the written receipt, it must have the name of the charity, the date, and the donation amount written on the receipt. Without one of those, you cannot deduct the donation from your income. So, throwing a few dollars into the Salvation Army bucket is no longer deductible. Everything else is the same with the charitable donation rules.
Cash donations are pretty vanilla, what about all those other work related donation efforts you may be involved in? What it boils down to is that if you donate anything (for cash, you deduct cash; for property, you deduct fair market value), unless it is to an eligible organization, it is not deductible.
Real Life Example
For example, if you “Adopt a Family” and purchase gifts for them, then you are not permitted to deduct the value of the gifts you purchase. If, however, you donate toys to Toys for Tots, you are permitted to deduct the value of the gifts you purchased because Toys for Tots, in your city, is likely an eligible organization. The family, however, is not an eligible organization so you can’t.
So, next year, when it comes time to support your favorite organization (or organizations), try to use a check instead of cash so that you can take at least a little edge off the tax bite come April 15th.