Congress approves 2009 deductions for 2010 Haiti earthquake donations

Congress has passed, and the president has signed, legislation allowing taxpayers to claim a deduction on their 2009 federal tax return for qualified Haiti disaster relief contributions made after January 11, 2010 and before March 1, 2010.

The bill gives taxpayers the option of claiming a deduction on their 2009 or 2010 tax returns for 2010 donations to a domestic U.S. charitable organization assisting Haiti. Taxpayers entitled to the deduction include both individuals and corporations.

However, taxpayers must itemize their deductions in order to take advantage of the early deduction. Additionally, the donation must be monetary. Taxpayers may not claim a 2009 tax deduction for 2010 contributions of marketable securities or other property that is easily convertible into cash. While donations by check or credit qualify, donations of food are not currently eligible. However, at least one Congressional proposal has promised to change this. We will keep you posted.

We encourage you to explore this option and look forward to helping you plan your tax position for a truly worthy donation.

FAQ: How much proof is enough, when contributing used clothing to charity?

You may have done some spring cleaning and found that you have a lot of clothes that you no longer wear or want, and would like to donate to charity. Used clothing that you want to donate to charity and take a charitable deduction for, however, is subject to a few rules and requirements.

Under IRS guidelines, clothing, furniture, and other household items must be in good used condition or better, to be deductible. Shirts with stains or pants with frayed hems just won’t cut it. Furthermore, if the item(s) of used clothing are not in good used condition or better, and you wish to deduct more than $500 for a single piece of clothing, the IRS requires a professional appraisal.

For donations of less than $250, you must obtain a receipt from the charity, reflecting the donor’s name, date and location of the contribution, and a reasonably detailed description of the donation. It is your responsibility to obtain this written acknowledgement of your donation.

Used clothing contributions worth more than $500

If you are deducting more than $500 with respect to one piece of used clothing you donate, you must file Form 8283, Noncash Charitable Contributions, with the IRS. For donated items of used clothing worth more than $500 each, you must attach a qualified appraisal report is to your tax return. The Form 8283 asks you to include information such as the date you acquired the item(s) and how you acquired the item(s) (for example, were the clothes a holiday gift or did you buy the items at the store).

Determining the fair market value of used clothing

You may also need to include the method you used to determine the value of the used clothing. According to the IRS, the valuation of used clothing does not necessarily lend itself to the use of fixed formulas or methods. Typically, the value of used clothing that you donate, is going to be much less than you when first paid for the item. A rule of thumb, is that for items such as used clothing, fair market value is generally the price at which buyers of used items pay for used clothing in consignment or thrift stores, such as the Salvation Army.

To substantiate your deduction, ask for a receipt from the donor that attests to the fact that the clothing you donated with in good, used condition, or better. Moreover, you may want to take pictures of the clothing.

If you need have questions about valuing and substantiating your charitable donations, please contact our office.