Thursday, February 11, 2010

More on charitable deductions

This is the third installment in my blogs about charitable donation deductions. Previously, we discussed the new rules for Haitian Relief deductions (1/27/2010), and donations of autos & boats (12/7/2009).

We are now seeing a steady inflow of individuals bringing in their 2009 data for tax return prep. One common question is: What can I deduct as charitable donations? Many people think that if you give money to a nonprofit you can always deduct it. But its not necessarily so. Let me give you a few examples.

Money given to a charity or religious organization in exchange for a service or product is only deductible to the extent that the value of the service or product received is less than what you paid for it. Example – you attend a fundraising dinner and pay $50 for a plate of spaghetti. If the value of the meal was $5, then you may take a deduction of $45 for the excess. Most large fundraising events will disclose this amount on your receipt or ticket so you don’t have to become a food critic to support your deduction.

Same thing applies when you buy a book, DVD’s CD’s etc for a package price. These have a value, and the charity will disclose to you how much you can deduct for tax purposes out of the total you actually gave for all that stuff you bought.

But what about money spent for charity raffles, bingo, games, etc? No deduction, says IRS, for any money spent on games of chance.

However, if you spend your own funds on behalf of a charity for unreimbursed travel, meals, supplies, educational seminars, uniforms or anything that supports the organization, and you are acting as an official representative of the organization, you can deduct these costs. An example would be a scout leader taking training, buying a uniform, and paying for gas to take a scout troop on a campout. In this case you would need to not only prove your expenses, but also have some documentation from the organization that you were acting in some official capacity, not just on your own behalf.

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