Ask Kim
New Tax Record-Keeping Requirements
Starting this year, you will need receipts for charitable contributions -- no matter how small.
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
January 2, 2007
I know that Congress passed a new law a few months ago requiring people to have receipts for all of their charitable contributions, no matter how small they are. I'm starting to gather my tax records for 2006 and don't have receipts for some small contributions I made at the beginning of the year, but I did make notes about how much I gave. Can I still count these contributions on my 2006 taxes?
Don't worry. You still can take the deduction for small cash contributions made before January 1, 2007, even if you don't have an official receipt from the charity. However, contributions you make this year fall under the new rules.
In 2006 and earlier, you didn't need a receipt to write off cash contributions of less than $250, as long as you kept good records of the donation yourself. So if you put $20 in the offering plate or a Salvation Army kettle, you could make a note of the gift in your own log and deduct it as a charitable contribution at tax time.
But the Pension Protection Act of 2006 changed those rules. Starting January 1, 2007, you'll need to have written communication from the charity or bank records as documentation whenever you give a cash contribution of any size.
Some charities, such as the American Red Cross, already give receipts for donations of all sizes. But if you don't expect to get a receipt from the charity, it's better to give a check rather than cash, so at least you'll have the bank record. And if you're putting money into the offering plate at your church and want to write off the contribution, you can either write a check or put cash in an offering envelope with your name on it, which many churches keep track of and can give you a receipt for your total at the end of the year.
When the Pension Protection Act was signed on August 17, 2006, several other charitable provisions went into effect, such as the rules that only permit you to deduct the value of household items or clothes you give a charity if they are in good used condition or better (see Assessing Donated Items' Value for more details).
That tax law also allowed people age 70½ and older to make distributions from their IRAs directly to a charity in 2006 and 2007, allowing them avoid the income tax bill on their required minimum distributions (although the money can't be deducted as a charitable contribution, too). See Transfer IRA Distributions to Charity for more information.