As readers ready their year-end tax plans, they need to keep in mind recent changes in charitable contribution deduction rules. Congress tightened the rules in the Pension Protection Act of 2006, and the rules affect deductions for most types of charitable contributions on this year’s tax returns.
If an item of household property is worth more than $500, it can be deducted regardless of its condition if the return is accompanied by a qualified appraisal. Household items include furniture, furnishings, electronics, appliances, linens, and similar items. Not included are food, paintings, antiques, and other words of art and jewelry.
The rules for fractional gifts were changed in 2006. They are complicated and have the effect of discouraging fractional gifts. Essentially to deduct any part of the contribution, the donor must transfer 100% ownership of the property to the charity within 10 years.
These recent changes are in addition to other longer-standing rules limiting charitable contributions. Taxpayers who plan to reduce their taxes through charitable deductions need to be up to date on the latest rules. Details are in IRS Publication 526, available free on the web site www.irs.gov.