New Substantiation Requirements for Charitable Donations
By Susan R. St. Amour, CPA

Syracuse, NY – February 19, 2007 - If you contributed to a charitable organization in 2006 and plan to make a donation in 2007, be mindful of new rules for individuals and businesses. Included in the Pension Protection Act of 2006 were a number of new rules regarding charitable donations. As part of these new charitable donation rules, the Act specifically addresses two substantiation requirements for charitable giving.

The first of these rules is for donations of clothing and household items. As of August 17, 2006, a deduction is allowed only for items that are in “good used condition” or better. Before carting your used items off to your favorite charity, you may need to pay more attention to the condition of the items you are donating. There is one exception to this rule and that is if you have a single item worth more than $500, with a qualified appraisal, you can still take the deduction even if it is not in at least good used condition. The Act also states that the IRS may deny a deduction for clothing or household items with minimal monetary value, such as socks or undergarments.

Although the Act does not define “good used condition”, it does define household items as furniture, furnishings, electronics, appliances, linens, and other similar items. It also specifically excludes the following as household items: food, paintings, antiques, other objects of art, jewelry, gems or collections. The second new substantiation rule is with respect to charitable giving recordkeeping requirements for cash contributions. For tax years beginning after August 17, 2006, (which means for most taxpayers the year 2007), a deduction for cash contributions will only be allowed if the donor maintains a bank record (either a cancelled check or the bank statement), or a credit card statement or a written communication from the donee indicating the name of the donee organization, the date and amount of the contribution. Don’t be discouraged from giving by these requirements. In most cases, the benefits of charitable giving still outweigh the cost of the additional paperwork.

The Pension Protection Act of 2006 included many other changes to charitable giving for both individuals and businesses. Please consult your tax adviser to find out how these changes apply to your personal tax situation.

Susan R. St. Amour, CPA is a manager and tax specialist at Green & Seifter CPAs, PLLC. She can be contacted at 315.701.6432 or suestamour@GreenSeifterCPAs.com. 

Green and Seifter CPAs offers a wide array of professional services spanning decades of experience in the areas of accounting, auditing, bookkeeping, financial planning, fraud, and taxation to individuals and businesses throughout Central New York.

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