Tax Tips for Donating to Sandy Relief Efforts

11/21/2012

Hurricane Sandy created widespread devastation on the east coast in late October, just a few short days before the election. While politics may spotlight how divided the country can be, natural disasters and other significant events usually bring out the best in Americans. It has been great to see so many people, regardless of political affiliation, join together to help those affected by the storm.  

Because the IRS gives generous tax deductions to help make our own charitable gifts go further, this week we’ll share some tips to help you make the most of your efforts to support storm victims (or any other year-end charitable gifts you may make).  

Did you know:  

  • You can deduct up to 50% of your adjusted gross income for cash gifts you make to "501(c)(3) organizations," or public charities working on behalf of storm victims. These include the American Red Cross and similarly recognizable groups.
  • If you give more than $250 in any single gift, you'll need a written receipt from the recipient, dated no later than the filing date of your return.
  • Gifts of food, clothing, furniture, electronics, or household items are deductible at "fair-market value," such as the price you would get for them at a resale shop. Consider using software, available at any office-supply store, for tracking your gifts and their value. You might be surprised at how much you can save.
  • Gifts of cars, trucks, and boats are a little trickier. Congress has cracked down on inflated car and truck deductions. If you donate a vehicle, you can deduct the fair-market value only if the charity actually uses it (such as a church using a van to drive its parishioners). If the charity sells the vehicle, your deduction is limited to the amount the charity actually realizes on the sale. And if that amount is more than $500, you'll have to attach a certification to your return that states the vehicle was sold in an arms-length sale and includes the gross proceeds from that sale.
  • Donations by text message have become very popular, and these donations are deductible like any other cash gifts. You can use your phone bill to substantiate your deduction.

An unfortunate side effect of these kinds of disasters is that charity scams commonly pop up during the relief effort. The IRS cautions us all to seek out qualified charities and warns taxpayers about bogus requests for donations to charities that do not exist. Also note that the IRS announced that they would give businesses and tax preparers affected by the hurricane an extra seven days to file payroll and excise tax returns that were due on October 31.  

Charitable contribution deductions on your tax return are common targets for IRS audits. If you are donating to Sandy relief or any other charitable organizations this year, it is imperative that you have receipts and proper documentation to prove your generosity!