- The Washington Times - Monday, March 10, 2003

It's the time of the year when Americans can do well because they do good. The Internal Revenue Service says more than one-third of all taxpayers claim deductions for charitable giving. Donors valued their contributions to nonprofit organizations and religious institutions at more than $140 billion in 2000, the most recent year for which statistics are available, according to the IRS.
But to get those deductions, tax filers must follow rules that can be a bit tricky.
To begin with, donations must go to IRS-approved charities or to religious institutions such as churches, mosques and synagogues. Contributions to individuals even, for example, to a needy homeless person are not allowed.
If donors have any question about a group's status, they can ask to see its tax exemption certificate. Or they can check IRS Publication 78 at a local IRS office, public library or online at www.irs.gov to determine if an organization is registered as tax-exempt.
It's especially important that taxpayers document contributions of cash or personal property valued at $250 or more, experts say.
"If it's $250 and above, and if you don't have a receipt from the charitable organization, it isn't deductible," said Jacob I. Friedman, chairman of the tax department at Proskauer Rose LLP in New York. "People have just a month and change to make sure they have those receipts, or they won't get the deductions."
For most taxpayers, documenting cash donations isn't a problem. They can save their checks or credit-card statements or the written receipts they receive from charities. It's determining the "fair market value" of noncash contributions such as used clothing, appliances and furniture that can cause headaches.
The IRS cautions that taxpayers tend to overvalue their donated goods.
"The fair market value of used clothing and other personal items is usually far less than the price you paid for them," the IRS says in its publication on charitable contributions. It suggests taxpayers check prices in consignment and thrift shops to help value their donations.
In recent years, the Salvation Army has provided a "valuation guide" that includes estimates of the resale prices of donated goods. A full listing can be found at the group's Internet site www.salvationarmy.org.
A used woman's blouse, for example, would have a resale value of $2.50 in poor condition and $7.50 in good condition, according to the Salvation Army guide. A double bed mattress might fetch $20 to $50, while a working color TV could bring $75 to $225.
Taxpayers also can get help valuing donations from their tax preparers but only if they've kept detailed lists of their contributions.
There also are a number of computer programs on the market that can be useful.
The ItsDeductible computer program or an optional online service at www.itsdeductible.com retails for $29.95 and can be used to track deductions.
This year, H&R; Block has entered the market with DeductionPro for $19.95. The company, online at www.handrblock.com, gives a $10 rebate when DeductionPro is purchased with some of its TaxCut software.
For donations of personal property worth less than $5,000, "it's up to the taxpayer to substantiate the value," said Charles Pomo, senior tax manager for Geller & Co., a financial outsourcing company based in New York.
For items valued at $5,000 or more, a formal appraisal is necessary, he added.
"Say a taxpayer is donating a used car," he said. "[Kelley] Blue Book value is widely accepted assuming the car is in good condition. You can prove that with photos of the car and copies of the purchase papers or maintenance records."
Kelley Blue Book is a publication that provides suggested prices or used cars. Taxpayers can look up prices at www.kbb.com.
The taxpayer also needs a written acknowledgment from the charity that received the donated car, Mr. Pomo said.
Many people don't realize that the expenses they incur in volunteer activities are tax deductible, said Lita Epstein, author of "The Complete Idiot's Guide to Tax Breaks & Deductions."
"You can write off 14 cents a mile if you're using your car for volunteer work," she said. "If you're making deliveries for Meals on Wheels or you're traveling to and from a charitable site, that counts. It can really add up."
Skilled workmen who donate services say electrical repair for a religious institution also can get a tax break, but the charitable group must give them a form or letter indicating the work they did and its estimated value.
The IRS will look at the level of a taxpayer's deductions, including those for charitable contributions, in determining who gets audited, the taxspecialists said.
But the thresholds appear to be quite high.
RIA, a company that provides technology and information to tax professionals, said the charitable deductions averaged $1,904 for the $30,000-to-$50,000 income group in 2000, $2,352 for the $50,000-to-$100,000 group, and $3,756 for the $100,000-to-$200,000 group.
The IRS has several publications aimed at helping taxpayers determine what qualifies as a deduction and what doesn't.
Publication 526, titled "Charitable Contributions," and Publication 561, "Determining the Value of Donated Property," are available on the IRS Web site, at IRS offices or by calling 800-TAX-FORM (800/829-3676).

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