(NOTE: This article has been updated for 2005.)
Now is the time to think about 2005 tax planning for charitable contributions. We at the IMF hope that you will help us continue our important work on behalf of the multiple myeloma community. Your support enables us to provide the many services we offer, including valuable programs designed to assist patients and caregivers. Here are a few tips to help make sure your contributions pay off on your tax return:
- To be deductible, contributions must be made to qualified exempt organizations, such as the IMF.
- Only contributions actually made during the tax year are deductible. Credit card charges and payments by check are deducted in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.
- If your contributions entitle you to merchandise, goods, or services, including admission to, for example, a charity ball, banquet, theatrical performance, or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received. For an item purchased at a charity auction, only the price paid in excess of the value of the item purchased is deductible.
- Donations of stock or other property are usually valued at the fair market value of the property. For stocks and bonds with an active market, the fair market value is the average price between highest and lowest selling price on the valuation date. This can be very beneficial if the stock or bond is worth considerably more than what you paid for it.
- Those who donate their cars may also claim only the fair market value of the car. The fair market value takes into account many factors, including the vehicle's condition. The fair market value may differ substantially from the car's Blue Book value. For vehicle donations, you must document the both the car donation and its fair market value. In most cases the value will be what the charity sells it for.
- You might also want to consider a contribution through some type of trust that would enable you to keep current income from the property but donate the balance to the IMF after your passing. In most cases, you would get a current deduction for the present value of the property being donated.
- For a contribution of $250 or more, you can claim a deduction only if you obtain a written acknowledgment from the qualified organization. A person donating property valued at more than $5,000 must obtain a qualified written appraisal with the exception of publicly traded securities.
For more information, please visit the Helping the IMF page of this web site for a link to Smith Barney's booklet Giving Back: Techniques for Charitable Giving. If you have questions about the deductibility of charitable contributions, you can download the PDF documents Publication 526: Charitable Contributions and Publication and 561: Determining the Value of Donated Property from the Internal Revenue Service web site. We also recommend that you discuss all substantial charitable contributions with your tax advisor as everyone's situation is different.
Note: R. Michael Shaw, CPA, JD, is the IMF's Treasurer.