As part of the recently signed pension bill, the Treasury Department and Internal Revenue Service will have to better define what constitutes "good" condition for donations of clothing or household items.
The Internal Revenue Service can deny deductions donated items such as furniture, appliances, linens, or electronics if the items aren't in appropriate condition.
Any significant household item, valued at more than $500, must now be appraised before the taxpayer can take a deduction. Another new rule requires that taxpayers who deduct cash donations have a receipt or bank record, such as a canceled check, to prove they made the gift.
A temporary break will also let taxpayers over the age of 70 and a half years to contribute up to $100,000 directly from an IRA to charity without paying tax on the money. Other changes created land conservation tax benefits for family farmers and ranchers, as well as extending incentives for companies to donate food and books that were enacted after Hurricane Katrina.
The revisions also carry a list of restrictions intended to tighten the rules for taxpayers and charitable organizations taking advantage of the tax exemptions in ways that may be abusive -- including new rules for tax-exempt organizations that offer credit counseling services, a group that has been the focus of IRS scrutiny since changes to the country's bankruptcy laws went into effect last fall.
Previously on WebCPA:
Tax Court Stands Tough on Clothing Deduction (Aug. 21, 2006)
Much More Than Pension Reform in Law (Aug. 9, 2006)
IRS Revoking Exemptions of Credit Counselors (Jan. 17, 2006)
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