Charitable Contribution before year end

With the holiday season upon us, many of you give generously to your favorite charities and we applaud your efforts. However, to ensure that your donations are tax deductible, there are a number of important points to keep in mind.

Rules for Charitable Contributions of Clothing and Household Items

Household items include furniture, furnishings, electronics, appliances and linens. Clothing and household items donated to charity generally must be in good used condition or better to be tax deductible. A clothing or household item worth over $500 does not have to meet this standard if you include a qualified appraisal of the item with your return.

To be deductible, you must generally get a receipt from the charity showing the date and place of the contribution and a description of the property. However, for gifts under $250, if it is impractical to obtain a receipt (e.g., goods are delivered to an unattended drop site) a receipt is not required if you have written records with the same information as required for gifts over $500 (as described below).

If the gift is worth $250 or more, you must get a written acknowledgement from the charity that includes a description of what was donated and when, and a statement either that no goods or services were rendered in return for the donation or describing and valuing what the charity provided in return. The acknowledgment must be obtained by the time the tax return for the year of the donation is filed or due, whichever comes first.

If the amount of your deduction for all similar noncash contributions (such as clothing, jewelry, furniture, electronic equipment, household appliances) is over $500, you must keep written records that (1) indicate the appropriate date each noncash item was acquired, (2) include a reasonably detailed description of the donated property along with its condition, (3) estimate the purchase price of the item, (4) describe its current retail (usually second-hand or thrift-store) value, and (5) explain how this value was determined (e.g., from the Salvation Army’s online donation guide: http://satruck.org/donation-value-guide). If the amount of your deduction for all similar noncash contributions is over $5,000, you’ll generally need to have the items appraised by a qualified appraiser.

Guidelines for Monetary Donations

You must have a bank record or a written statement from the charity to deduct any donation of money, regardless of amount. The record must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, and bank, credit union, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card, and payroll deduction. For payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document furnished by your employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

These requirements do not change the long-standing requirement that you must obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.

Other Important Reminders

Other important reminders to keep in mind while planning your holiday and year-end charitable giving include the following:

• Qualified Charities. It is important to check to see if the charity is eligible to receive tax-deductible donations. “Select Check,” a searchable online tool available on IRS.gov, lists most such eligible organizations. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in the tool’s database.

• Year-end Gifts. Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2014 count for 2014, even if the credit card bill isn’t paid until 2015. Also, checks count for 2014, as long as they are mailed in 2014.

  Itemize Deductions. For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction.

Special Rules for Cars Boats, and Airplanes. The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. The organization must give you Form 1098-C or a similar statement that you can attached to your tax return. 

Are Your Bank Accounts Insured?? Read this to make sure your money is protected

Coming from the commercial banking world I consistently saw that many of my clients accounts were not fully insured.  The insurance is absolutely free and the only thing you need to do is structure your bank accounts in the right way. During the last bubble many smaller banks went out of business and some of the customer lost their life savings.  It would have happened to many more people if the big banks were not bailed out by the Federal Government.  Below is a general overview of how to setup your bank accounts the right way to avoid any possible loss of money.  

How to make sure you are Insured

The Federal Deposit Insurance Corporation (FDIC) has provided deposit insurance coverage to depositors of insured banks since 1933. This protection is important to all investors, especially those who tend to be invested heavily in cash and who are dependent on these accounts to cover living expenses. Covered institutions must display an official sign at each teller station.

Types of Deposits Protected. All types of deposits received by a financial institution in its usual course of business are insured. For example, savings deposits, checking deposits, Certificates of Deposit (CDs), cashier’s checks, and money orders are all covered. Certified checks, letters of credit, and traveler’s checks, for which an insured depository institution is primarily liable, are also insured when issued in exchange for money or its equivalent, or for a charge against a deposit account.

Any person (U.S. citizen or not) or entity can have FDIC coverage at an insured bank. However, only deposits that are payable in the U.S. are covered. Deposits only payable overseas are not insured.

Securities, mutual funds, and similar types of investments, even if purchased through a bank, are not covered, nor are safe deposit boxes or their contents. Similarly, treasury securities purchased by an insured institution on the customer’s behalf are not insured, but these investments are backed by the full faith and credit of the U.S. government.

Amount of Coverage Available. A depositor is normally insured up to $250,000 in each insured financial institution. Accrued interest is included when calculating insurance coverage. Deposits maintained in different categories of legal ownership are separately insured. Accordingly, an individual can have more than $250,000 of insurance coverage in a single institution provided the funds are owned and deposited in different ownership categories.

Deposits held in one insured bank are insured separately from any deposits held in another separately insured bank. For instance, if a person has one checking account at Bank A and another checking account at Bank B, both accounts would be insured separately up to $250,000. Funds deposited in separate branches of the same insured bank are not separately insured.

Up to $250,000 in deposit insurance is provided for the deposits a consumer makes at the same insured institution in a variety of retirement accounts, including traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE Plans.

Maximizing FDIC Coverage. FDIC coverage is not determined on a per-account basis, but on an ownership basis. Thus, the type of account has no bearing on the amount of insurance coverage, and the social security numbers or tax identification numbers do not determine coverage. Instead, separate insurance coverage is provided for funds held in different ownership categories. This means that a bank customer, who has multiple deposits, may qualify for more than $250,000 in insurance coverage if the customer’s accounts are deposited in different ownership categories and the requirements for each ownership category are met. Thus, increasing your available FDIC coverage may be as simple as retitling accounts so they fall into different ownership categories.

For example, an individual with three individual accounts, each worth $100,000 for a total of $300,000, would have only $250,000 of coverage. However, a joint account worth $500,000 would be fully covered ($250,000 per person).

Please give us a call if you would like more information or our help in making sure your accounts are structured to maximize your FDIC insurance protection.  We can easily work with your Jupiter Bankers.  We are here for many different financial sides of your life whether it be the banking or tax side.  

Sincerely, 

Abacoa CPAs