12/28/10 — Clock ticks away to make tax deductions

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Clock ticks away to make tax deductions

By Catharin Shepard
Published in News on December 28, 2010 1:46 PM

The clock is ticking to get in last-minute charitable donations to qualify for 2010 federal tax deductions.

Friday is the deadline to make a qualifying charitable donation and claim the deduction on taxes in 2011.

Churches, the Red Cross, the United Way, the Girl Scouts and Boy Scouts of America, registered non-profits, hospitals, utility company emergency programs, public park and recreation departments and civil defense organizations are usually qualified organization, among others, tax specialist and Liberty Tax owner Paula Smith said.

But not all charitable donations will qualify for a tax deduction. The charity must be recognized as a qualifying institution, according to the Internal Revenue Service.

There are a few other things to keep in mind when donating, if claiming a deduction is a goal.

Whether donating money, items or property, it's important to get a receipt as evidence of the donation before claiming the donation as a deduction. If a taxpayer claims a deduction due to charitable donation, but later cannot prove having made the donation, the deduction can be taken away by the Internal Revenue Service.

"Without those receipts anyone can come in and say they donated," Ms. Smith said.

When donating items, the items must be in good condition. If the item is in fair or poor condition when it is donated, it cannot be used as a tax deduction, Ms. Smith said.

Furthermore, charitable contributions are only deductible if taxpayers choose to itemize tax deductions. If a household plans to take the standard deduction instead, year-end charitable contributions are not going to count toward the total tax deduction. Taxpayers have to choose one or the other.

The standard deduction for filing 2010 taxes is $5,700 for a single person and $11,400 for a married couple who file jointly.

Homeowners who pay property taxes and interest on a mortgage may want to itemize their deductions as some of those costs can be itemized and deducted from the tax bill, along with charitable contributions and a handful of other items.

When a married couple files separate returns and one spouse itemizes deductions, the other spouse must also itemize deductions, according to IRS regulations.

Some taxpayers, including nonresident aliens, dual-status aliens, certain individuals who file returns for periods of less than 12 months and an estate or trust, common trust fund or partnership, are not eligible to file for the standard deduction.

Some medical expenses, including prescription eyeglasses or contact lenses, laser eye surgery, hearing aids and wheelchairs, are deductible, along with fees paid to doctors, hospital services, psychologists and other medical services providers. According to the IRS, deductions are allowed only for "expenses primarily paid for the prevention or alleviation of a physical or mental defect or illness."

There are further rules governing charitable contributions. If the contribution entitles the taxpayer to merchandise, goods or services, including admission to an event, only deduct the amount that exceeds the fair market value of the benefit received, the IRS instructs.

Besides making charitable donations, December is also a good time of year to examine any major life changes and look at how they may affect your filing status, financial experts say.

Having a baby, for example. If the child is born before the start of the new year, parents can claim the child as a dependent on the 2010 tax forms. Getting married, another milestone, also brings a question about whether to file separately or jointly, Ms. Smith said.

"Depending on tax liability, they may want to file jointly, they may want to file separately," she said.

Debts are something to consider when filing for the first time as a married person, Ms. Smith added.