NEW RULES FOR CHARITABLE CONTRIBUTIONS

Congress is looking everywhere to find more money to put in the government coffers. Now they are even squeezing money from charities. The record keeping that you need to do to substantiate charitable contributions starting in 2007 is a nightmare. Starting in 2007, to claim a deduction, things get more complicated and most likely, you will not be able to claim all of your charitable contributions. I know that in the past I estimated some of my cash contributions. For example, when I am traveling I put cash in the collection plate. I deducted this cash on my personal return. Starting in 2007, I will not be able to deduct the cash.

• As mentioned, you can no longer deduct cash contributions. When I say "cash" I don't mean checks, sometimes people get confused by this. This means that any cash that you drop in the the collection plate or give to the Salvation Army Santa Claus will not be deductible on your return.
• Checks are valid substantiation for gifts of $250 or less. For example, my wife just wrote a check for $400 to a charity. Unless we get written confirmation from the charity (see below), we will not be able to deduct this charitable contribution. On the other hand, if she would have written two $200 checks, we would have been under the $250 limit and the checks would have been sufficient. She now knows better!
• For donations over $250, you will need a written confirmation from the charity acknowledging the contribution and stating that you did not receive anything of value for the contribution. For example, last year I gave $1,000 at a silent auction for the right to be "cook for the day" at our local school. In 2007, in order to claim such a deduction I will need to have a written statement stating that there was no value in the contribution.

Remember the deduction for the contribution of old clothes or household items? Things will get trickier in 2007. Under the Pension Protection Act of 2006, you can't deduct charitable donations of clothes or household items (such as furnishings, electronics, appliances and linens) unless they're in "good" condition or better. Congress never defined "good," but I suspect my old socks and underwear are out. (Remember when Bill Clinton disclosed his tax return when he was president and he reported taking a donation for "used boxer shorts" at $4.50 per pair?)

Congress did give the IRS the power to issue regulations to deny a deduction for items with "minimal monetary value."

Even if an item is clearly "good," if you claim a value of more than $500, then you must include a qualified appraisal with your return. That's $500 for an item, not total.

Even if no item is valued at more than $500, if the sum of the non-cash contributions is more than $500, you will still have to file Form 8283 with the date of the contribution, the date acquired, your cost, the fair-market value, and the method used to determine the fair-market value. Special rules apply to contributions of cars, boats, and other items (such as art, jewelry, and collections) with a claimed value of more than $5,000.