• December 21, 2014

Beating the tax man

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Posted: Monday, December 31, 2007 12:00 pm | Updated: 3:53 pm, Thu Jan 23, 2014.

By Don Bolding

Killeen Daily Herald

You still have today to make a charitable donation and deduct it from your 2007 federal income tax if you satisfy all the ifs, ands or buts.

Probably number one is that you have to itemize, that is, file a Schedule A form with a full-dress 1040, not a 1040A or 1040EZ, and you have to have enough itemized deductions of all sorts to exceed the standard deduction for your tax bracket.

If you make a cash donation, you have to have a receipt showing the date. A donation by check is good if it's mailed today, and a gift by credit card is good if the statement will show it was made today, although for all of those, you need a confirmation from the organization with a statement that you received no goods or services in return for the amount. Even if you did receive something, you can deduct any amount over its fair market value or stated price.

Deductions cover both money and the fair-market value of goods such as clothing or household items.

But if you transfer stock to a charity or make a contribution by telephone, you'll have to wait until next year to deduct it because you have to wait until the corporation actually moves the stock or the financial institution actually transfers the money. You can sign a note or pledge today, but you can't deduct the payment until it's actually made. And you can't deduct any contingent gift until it's sure it won't be returned. For example, you can send a check to a building fund today, but the organization may cancel the plan and return the gift. You can take the deduction only for the year they use the money.

And as always, you have to be careful about who gets the money. The organization should be certified as a nonprofit group by the federal government. "There are a lot of scams out there," said financial adviser Spencer Smith of the accounting firm of Lott, Vernon & Co. of Killeen and Copperas Cove. "For example, a lot of them sprang up right after the World Trade Center disaster. People should check and see that their donations are valid."

The best way to do that is to find the organization on Internal Revenue Service Publication 78, a cumulative list of organizations, on irs.gov.

Smith also advised knowing more about any organization, such as its proportion of administrative costs against the value actually received by clients.

IRS Publication 526, "Charitable Contributions," also available on irs.gov, says qualifying organizations generally must be religious, charitable, educational, scientific, literary or veterans' groups or must be devoted to the prevention of cruelty to children or animals. Also included are gifts to governments at all levels if the contributions are only for public purposes, and nonprofit schools and hospitals. You can deduct expenses paid for a student living with you who is sponsored by a qualified organization and out-of-pocket expenses incurred in serving a qualified organization as a volunteer.

These organizations don't qualify:

Civic leagues, social and sports clubs, labor unions, and chambers of commerce;

Foreign organizations, except for certain Canadian, Israeli and Mexican organizations defined by treaty, and only if you had income from those countries;

Groups operated for personal profit;

Groups whose purpose is to lobby for changes in the law;

Homeowners' associations;

Individuals or families;

Political groups or candidates for public office;

Cost of raffle, bingo or lottery tickets;

Dues, fees or bills paid to country clubs, lodges, fraternal orders or similar groups;

Tuition;

Value of time or services;

Value of blood given to a blood bank.

Local organizations who always need donations, last-minute or otherwise, are the 26 member agencies of the United Way of the Greater Fort Hood Area, whose 2007 fund drive is still going on. These are: The American Red Cross Heart of Texas chapter; Bell County Human Services/Bell Help Center; Boys and Girls Club of Coryell County; Boy Scouts of America Longhorn Council; Camp Fire USA Tejas Council, Inc.; Central Texas Armed Services YMCA; Central Texas Council on Alcoholism and Drug Abuse; Central Texas Youth Services Bureau, Inc.; Central Texas 4C's, Inc.; Children Advocacy Center of Central Texas; Christian Farms-Treehouse, Inc.; Communities in Schools of Bell-Coryell Counties, Inc.; Cove House Emergency Homeless Shelter, Inc.; Families in Crisis, Inc.; Food Care Center; Fort Hood Area Habitat for Humanity; Fort Hood Child and Youth Services; Girl Scouts Bluebonnet Council, Inc.; Greater Killeen Free Clinic; Hill Country Community Action Association of Copperas Cove and HCCAA of Killeen; Home and Hope Shelter, Inc.; Lone Star Legal Aid; Mothers Against Drunk Driving; Peaceable Kingdom Retreat for Children, Inc.; and The Refuge Corp.

The basic textbook for all individual income tax matters is Publication 17, available in book form at libraries and other locations and in its entirety at irs.gov. Publications 78 and 526 are expansions of material contained there.

Contact Don Bolding at dbolding@kdhnews.com or call (254) 501-7557

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