What IRS Rules Do I Need to Know?
For the estimated 35 percent of American taxpayers who itemize their federal tax deductions, charitable donations are an important component. They?re one of the few deductions unaffected by the dreaded Alternative Minimum Tax, which disallows many common tax deductions and credits and negates their tax benefits.

But even if you?re subject to AMT–which increasing numbers of even middle-income taxpayers are–charitable contributions will continue to reduce your tax liability. You just have to be careful to follow IRS rules when you claim the deductions.

Because the IRS is concerned about taxpayers overestimating their generosity, it’s taking a harder look at both cash and non-cash contributions. But Charity Navigator, a Mahwah, NJ-based charity evaluator, has a few tips for maximizing the tax benefits of your gifts to charity.

Document Cash Donations: Don’t try deducting the change you drop in a collection bucket without written documentation from the charity. Drop a check in the bucket instead-it’s an accepted proof of your donation, according to the IRS.

You can also document donations with a credit card statement, bank statement or a written acknowledgment from the charity (showing the charity’s name, the date of the donation and the amount given).

Have Even More Documentation for Gifts of $250 or More: Now you not only have to prove you made a donation. You have to prove you didn’t receive anything in return for it. So make sure your receipt verifies you did not receive any goods or services in exchange for the donation.

Be Extra Cautious When Taking a Deduction for a Car: Many taxpayers still inflate the value of the donated cars and trucks. But here is what you need to know: if you donated a car worth more than $500, then you can only deduct the amount the charity received from the sale of your car.

Do not, I repeat, do not deduct the fair market value unless the charity is keeping the vehicle for its own use, the charity makes repairs to the car before selling it, it’s sold at a discount to someone with a low income; or its worth less than $500.

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