Q: How should Iowans choose where to give to charity this holiday season?
A: Iowans have very big hearts. That was shown with the outpouring of resources donated to help victims of the tornado and flooding disasters that hit our state this year. The holiday season is a great time to give to charity and provide both joy and comfort to those in need. As Iowans make the season brighter and life more manageable for many with their charitable donations, it's important for those donating to know about the organization to which they are giving, including the eligibility of the donations for tax deductibility. People often give to the charity that is near and dear to their heart. Iowans interested in writing charitable gifts off on their taxes, should also be sure that the charity is a qualified organization in the eyes of the Internal Revenue Service.
Q: What steps should Iowans take to deduct their charitable contributions?
A: Here are a few tips from the Internal Revenue Service for Iowans to remember about deducting charitable contributions. Donations are deductible only in the year they are made. Receipts that show the name of the organization, date of contribution, and the amount of contribution are important for tax purposes if the donation is made in cash. Canceled checks, bank or credit union statements, credit card statements or payroll deduction records are acceptable records to keep for contributions made using those methods. It's also important to remember that if a benefit is received in return for the contribution, only what was made as a charitable contribution above the fair market value of the benefit received can be deducted. If the contribution is a non-cash contribution like property or if the contribution is an out-of-pocket expense the IRS has very detailed requirements that need to be followed. The requirements are available on the IRS website, www.irs.gov. Qualified organizations, other than churches and governments, must apply to the IRS. If there are any doubts whether the organization is a qualified organization, Iowans should check the status of the charitable organization by visiting www.irs.gov/app/pub78 or calling the IRS at 1-877-829-5500.
Q: What about those who take advantage of the tax laws for charitable giving in a way that doesn't meet the intent of the law?
A: During the last seven years I've been conducting an assessment of the federal laws governing tax-exempt, nonprofit organizations and oversight of a variety of tax-exempt organizations. The size and complexity of the tax-exempt sector has grown tremendously, and the federal laws haven't always kept up. I've won passage of some reforms to the law, along with passage of new incentives to encourage charitable giving. When the disasters hit Iowa and the rest of the Midwest this year, I was able to get passed by Congress enhanced tax breaks to encourage additional charitable giving for disaster relief. My tax relief measures for Iowa and other Midwestern states included temporarily waiving cash contribution limits to charities in the disaster area and increasing the charitable mileage reimbursement rate for volunteers aiding in disaster relief. I also made sure that those same mileage reimbursements would not be treated as income for volunteers through December 31, 2008. From the beginning, the generosity reflected in charitable giving has been part of the fabric of American life, and it's important to continue to foster opportunities for Americans to give and to protect those opportunities from those who would take advantage of the law and the good will of donors.