Giving: Tax Rules
This information is a summary of certain charity rules and is not intended to be all inclusive or to preclude the need for assistance from a donor's personal tax advisor.
Acknowledgement for Contributions of $250 or More -
If the value of the contribution is $250 or more, and the individual wants to deduct the expenses for federal income tax purposes, he/she must obtain a written acknowledgement from the charity. This acknowledgement would normally be obtained from the World Relief Representative of the local church if donated at the local level. If donated to the national Board the acknowledgment should be obtained from the national treasurer.
The acknowledgement should include the wording "We have not provided any goods or services (except for intangible religious benefits as defined by the Internal Revenue Service) in consideration, in whole or in part, for any cash or property contributed." The acknowledgement should be kept on file in case the charitable deduction is challenged by the Internal Revenue Service. It does not need to be filed with the tax return.
Donations of Appreciated Securities (Stock or Mutual Funds) -
Consider donating appreciated stock or mutual funds held over 12 months to gain a tax deduction and avoid the capital gains on the appreciation. Some matters to consider as follows:
- Must be held over 12 months (i.e. long term gain property)
- Charitable deduction equal to fair market value of the security at time of donation
- Make sure you do donate the security and not sell with a donation of cash
- May need to file a Form 8283 with your tax return (not a big deal)
Tax Free IRA Distributions for Charity -
IRA owners who are at least 70 1/2 years of age can make tax-free distributions of up to $100,000 from a traditional or Roth IRA to a tax-exempt church or charity. Now IRA required minimum distributions can be directly paid to a charity to save Federal and State taxes. This provision is effective through 2007.
Gifts of Clothing and Other Personal Property -
Gifts of clothes or other personal property should be deductible at fair market value as of date of gift assuming the property is in "good used condition" or better. Some matters to consider as follows:
- Get a receipt for items donated (receipt does not need to include the value)
- Consider taking a photo to have some verification of the condition
- Gifts in excess of $500 will require a Form 8283 attachment to your tax return
Out-of-Pocket Expenses Related to World Relief Work -
1. Qualifying Expenditures - Defined:
Out-of-pocket expenses incurred in an official capacity for the Apostolic Christian World Relief, Inc. should be deductible as a charitable contribution assuming the following attributes are present:
a) There is no significant element of personal pleasure, recreation, or vacation involved in the expenditures.
b) An acknowledgement from the charity is necessary if the value of the expenditure(s) is greater than $250. (More information on the acknowledgement is provided later in this memorandum.)
c) The charity (World Relief) has approved the specific project and has approved the individual(s) doing the traveling to perform services on that project.
2. Qualifying Expenditures - Illustrated:
Qualifying out-of-pocket expenses for the charity would normally include the following:
Transportation costs - The IRS allows 14¢ per mile for charitable purposes or the actual gas and oil expenses, whichever is greater. (Depreciation, insurance and maintenance expenses on a vehicle are not allowed.)
Meals and lodging - Meals and lodging incurred while away from home overnight on official church business are included as deductible out-of-pocket expenses. These expenses are normally not allowed for spouses and children. (Expenditures for a spouse may qualify if their expenditures are an integral part of the charitable purpose of the travel.)
Parking, fees, tolls, etc.
Air flight expenses, trains and other modes of travel
Phone expenses incurred transacting official World Relief business
Supplies, materials, books, etc. that are used in official World Relief business
3. Un-reimbursed Out-Of-Pocket Expenses:
Un-reimbursed out-of-pocket expenses meeting the requirements listed above should be deductible as an itemized deduction on the donor's personal tax return net of any reimbursements received. To support any such deductions, receipts or other appropriate forms of documentation should be maintained. There is no deduction allowed for value of time or service. (For contributions exceeding $250, an acknowledgement will need to be obtained prior to the due date of the tax return. See more information on the acknowledgement below.)
In order to improve the "audit trail" for the Internal Revenue Service, the donor may want to contribute cash to the specific World Relief Fund then direct the applicable World Relief treasurer to pay the expenditure directly.
4. Reimbursed Out-of-Pocket Expenses:
Any reimbursements received for qualifying out-of-pocket expenses incurred in an official capacity for World Relief negate the deduction for the charitable contribution. If the reimbursement is less than the actual expenses incurred, the excess will be allowable as a charitable deduction as an un-reimbursed out-of-pocket expense as described in the above section.
Donation of Vehicles
Due to law changes in 2005, the documentation for donations of vehicles has increased. These types of donations are still a viable option but you will need to consider the following to avoid problems:
Provide the following for the charity
- Date of donation
- Name, address and Social Security number of donor
- VIN #, make, model and year of vehicle
- General description of the condition (fair, good, very good, etc.)
- Estimated value of the vehicle at date of donation (must supply an appraisal for values exceeding $5,000)
If the charity sells the vehicle additional information will be required as follows
- Gross proceeds of arm's length sale
- Date of sale
- Deductible amount of donation can't exceed the gross proceeds
Signed acknowledgements will be required to be attached to your tax return