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Friday March 27, 2015

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IRS Records for Charitable Deductions

In IR-2015-48, the IRS outlined the required records for substantiating charitable deductions. The basic requirement is that gifts are made to a qualified charity. The Select Check online tool at shows qualified nonprofits. Even though they are not on the IRS web site, gifts to churches, synagogues, temples, mosques and government agencies are also deductible.

Most documentation must be in your possession before filing your tax return. You must itemize deductions on Schedule A of Form 1040 to claim these charitable deductions.

1. Gifts Over $250 – To claim a charitable contribution deduction, donors must get a written acknowledgement from the charity for all contributions of $250 or more. If you give property, the acknowledgement must include a general description of the property.

2. Property Gifts over $500 – A noncash gift with a value greater than $500 requires you to file IRS Form 8283. If the noncash gift has a value greater than $5,000 ($10,000 for family business stock), then an appraisal by a qualified appraiser is required.

3. Vehicle Donations – A deduction over $500 for a car, boat or airplane donation is usually limited to the gross sale proceeds. Your charity will send you Form 1098-C, which you should submit with your tax return.

4. Clothing and Household Goods – Gifts of furniture, furnishings, electronics, appliances and linens generally must be in good used condition or better to be tax-deductible. An exception is available for gifts of clothing or household items over $500 if you obtain a qualified appraisal.

5. Cash – You must have a bank record or a written receipt from the charity in order to deduct any donation of cash. The record must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union and credit card statements with the name of the charity, the date, and the amount paid.

6. Credit Card Gifts – The statements should show the name of the charity, the date and the transaction posting date. For payroll deductions, you should retain a pay stub or Form W-2 wage statement from your employer showing the gift amount, along with your charitable pledge card.

7. Year-end Gifts – Contributions are deductible in the year when made. Valid checks sent by U.S. Mail by December 31 are deductible. Gifts charged to a credit card before the end of 2014 count for 2014, even if the credit card bill is paid in 2015.

The IRS has a helpful mini-course on these charitable giving rules that may be found on its website ( entitled “Can I Deduct My Charitable Contributions?”

Senate, House Budget Committees Report Budget

On Thursday, March 20, both the Senate Budget Committee and the House Budget Committee wrapped up work on their fiscal year 2016 budget resolution. The new fiscal year starts on October 1st.

It is expected that the Republican majority in the Senate will begin consideration of their budget on the week of March 23. It typically takes a week of legislative floor time for the Senate to complete action on the budget. The House is also expected to take up the budget; however, the budget debate in the House is typically limited to a single day.

The Senate Budget would balance the nation’s budget in 10 years, according to information from Chairman Mike Enzi’s (R-WY) staff, without any tax hikes while preserving many of the nation’s safety net programs. “The committee’s approval of this balanced budget represents a significant first step in changing how we do business in order to safeguard the future for our kids and grandkids,” said Chairman Enzi. “The commonsense ideas and solutions that are part of this proposal can deliver real results and real progress to hardworking American families. I look forward to consideration of our plan by the full Senate next week.”

Senate Budget Committee Ranking Member Bernie Sanders (I-VT) was critical of the Senate Republican Budget. Sanders stated, "What they are proposing is to cut programs for some of the most vulnerable people in this country — the elderly, children, sick low-income people."

After the House Budget Committee reported its budget resolution, Chairman Tom Price (R-GA) stated, “By demanding Washington live within its means, we are forcing government to be more efficient, effective and accountable, providing our local communities the freedom and flexibility to improve the delivery of vital services and assistance to those in need, and saving and strengthening vital programs for America’s seniors.”

House Budget Committee Ranking Member Chris Van Hollen (D-MD) was critical of the House Republican budget, stating, “We can do better, much better, and next week Democrats will propose a budget that promotes a more rapidly growing economy with more broadly shared prosperity. That is the right direction for America.”

Next week, both chambers will take up their respective reported resolutions for consideration. Following that, both chambers will appoint conferees to work out the differences in those budgets to produce a conference report that must then be approved by a majority of both chambers.

Applicable Federal Rate of 2.0% for April -- Rev. Rul. 2015-7 (18 March 2015)

The IRS has announced the Applicable Federal Rate (AFR) for April of 2015. The AFR under Section 7520 for the month of Arpil will be 2.0%. The rates for March of 1.8% or February of 2.0% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2015, pooled income funds in existence less than three tax years must use a 1.2% deemed rate of return. Federal rates are available by clicking here.

Published March 20, 2015
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