Donations of furniture to charity

To write off any cash contributions, no matter how small, you need a canceled check, bank record or a receipt with the charity's name and donation amount. That means that putting cash in the church collection plate or the Salvation Army bucket is a no-no if you want to be able to take a deduction for it.

As with all itemized deductions, timing is everything. You can take the deduction for your contribution in the year that you make it. For example, if you mailed a check to your favorite charity on December 31, you can write it off on that year's tax return. If you charge the donation on a credit card, the write-off is claimed in the year the charge is made, even if you don't pay the credit card bill until the following year.

But a pledge to make a donation is different: Because it's only a promise to make a future donation, there's no deduction until you actually follow through.

Donations are limited

There's also a limit on how much you can deduct. The basic rule is that your contributions to public charities, colleges and religious groups can't exceed 50 percent of your Adjusted Gross Income (AGI). The caps are a bit lower for gifts to other types of nonprofits. When it comes to gifts of appreciated property, the limit drops to 30 percent of AGI. If these restrictions limit your write-off in the year of the gift, the excess deduction carries over to the next year.

Also, keep in mind that you can't write off a contribution to the extent that you get something in return. For example, if you buy a $50 ticket to a fundraising dinner at a church, but the cost of the dinner is $20, you can deduct $30. For donations of more than $75, the nonprofit must give you a written statement telling you the value of what you received in return and reminding you that you can't deduct that portion of your contribution.

There's also a special rule for folks who donate to colleges and universities and receive the right to buy tickets to school athletic events: They can deduct 80 percent of their donation.

Appreciated property

Cash may be king, but if you want a really big tax saver, your best bet may be a donation of appreciated property—securities, real estate, art, jewelry or antiques.

If you have owned the property more than a year, you can deduct its full fair market value and escape income tax on the appreciation. It pays to keep that property the full 12 months before giving it away: For property held one year or less, IRS only allows you to claim a deduction on the price you paid for it.

Let's say you own stock that you bought many years ago for $1, 000 that is now worth $10, 000, and that you intend to make a $10, 000 gift to a major fundraiser for your alma mater. If you write a check for $10, 000, the college gets $10, 000, and you get to deduct $10, 000. If instead, you give the $10, 000 worth of stock, the college still gets $10, 000 (it won't owe any tax on the profit when it sells the stock), you still get to deduct $10, 000... and you get something more.

You eliminate the tax you'd owe if you sold the stock for $10, 000. Such a sale would trigger a capital gains tax on the $9, 000 of profit, and that would cost you $1, 350. Making your gift with stock instead of cash saves you that $1, 350. If you don't really want to part with the stock because you think it's still a good investment, give it away anyway. Then use your $10, 000 of cash to buy the shares back in the open market. That way you'll only be taxed on future appreciation.

How a gift is used affects donor value

For property worth more than $5, 000 ($10, 000 for stock in closely-held firms), you'll need to get a formal appraisal. Not only that, but you'll have to make sure the appraiser is a member of a recognized professional group or meets minimum education and experience guidelines. If you don't, the IRS can disallow your deduction.

If you're donating tangible personal property, such as a work of art, what the charity does with the item affects how much you can deduct. If you donate land so the local homeless shelter can build a new facility to house more people, you can write off the full market value.

But let's say you donate a work of art to the shelter for its fundraising auction: In that case, you only get a deduction for the price you paid for the artwork. What if you donated the piece of art to a museum that will display it as part of its collection? In that case, you get to deduct the full market value.

Contributing household items

Donating used goods such as clothing, linens, electronics, appliances and furniture gets you a write-off for the item's fair market value at the time you donated it, which may be considerably less than what you originally paid.

For items valued at more than $500, you'll need to fill out Form 8283 and attach it to your return. On this form you have to describe each item over $500 that you donated, identify the recipient, and provide information about the value of the item, including your cost or adjusted basis.

Congress has clamped down on donations of household goods to make sure folks aren't inflating the value of their used stuff. No tax deduction is allowed unless an item is in good condition or better. If an item in less-than-good condition is valued at more than $500, you can take a deduction only if you get the item appraised and attach the appraisal to your return. Congress also gave the IRS broad authority to deny deductions for low-value items such as used socks and underwear.

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