Know new rules for charitable giving

by Center for Personal Finance editors

YONKERS (12/18/06)--As you plan for year-end charitable contributions, be aware of some new twists. Some benefits may be short-lived, and some requirements will mean more recordkeeping (Consumer Reports Money Adviser December).

Here's a rundown of some of the changes:

• Seniors get a break. Because of the Pension Protection Act of 2006, individuals who are at least 70½ can donate up to $100,000 directly from their individual retirement accounts without paying tax on the withdrawal. Hurry--the tax break is only for 2006 and 2007, unless Congress extends it.

• Get a receipt from the charity. Keep good records, if you don't already. Now you have to substantiate any monetary donations with either a financial statement or written receipt from the charity. As of Aug. 17, 2006, you can't deduct the value of any donated item--including clothing, furniture, and appliances--unless the item is in good used condition. There are exceptions: items of special value such as a badly worn Green Bay football from the Vince Lombardi era or baseball glove used by Hank Aaron.

• The limit just went up. Now you can give up to $12,000 per person, per year, without reporting it to the Internal Revenue Service, and possibly without incurring the federal gift tax. That's up from $11,000 in recent years.

• Good news on AMT. When determining alternative minimum tax eligibility, charitable donations aren't counted. That means everyone who itemizes can get a full federal deduction on a contribution.

For more information, read "Preparation Softens Blow of Alternative Minimum Tax" in Home & Family Finance Resource Center.

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