How to Do Your Part and Still Avoid the Taxman

In these times which involve an increasing number of contemplated charitable gifts, it may be useful to keep in mind some of the basic legal principles which our colleagues in the Baker & Daniels tax exempt group have put together.

CHARITABLE CONTRIBUTIONS FOR DISASTER RELIEF

In the wake of Hurricane Katrina, people from every part of the United States and abroad are searching for ways to help victims of this and similar disasters. For individual taxpayers in the U.S., the basic rules for deductible charitable contributions are the same in times of emergency as in periods of calm:

• Gifts must be made to qualified charitable organizations, which include nonprofit social service agencies (like the Salvation Army, the Red Cross, and United Ways); federal, state, and local governments (for public purposes); churches, synagogues, temples, and mosques; nonprofit schools and hospitals; and certain war veterans organizations.
• Gifts directly to individual victims by an individual taxpayer are not deductible charitable contributions.
• The value of an individual's volunteer time or services is not deductible, although out-of-pocket expenses while providing volunteer services to a qualified charitable organization may be. Out–of–pocket expenses are costs that would not be incurred absent the volunteer service (such as a special uniform needed to be a volunteer nurse's aide or the cost of gas to travel to the volunteer site), and do not include personal, living, or family expenses.
• Contributions of property to a qualified organization are deductible only to the extent of the property's fair market value. There are different rules for determining the value of household goods, vehicles, real estate, and other items.
• Contributions of cash or property valued in excess of $250 must be substantiated by a written receipt from the charity (a cancelled check is not enough). When deducting valid out–of–pocket expenses for volunteer service to a charity, the taxpayer must obtain a written acknowledgement from the charity describing the services provided and including certain other disclosures required for all charitable contribution receipts.