Military Officer - July 2007 - (Page 42)

financialforum It’s Good to Give The tax rules for charitable deductions have changed, making it necessary to keep accurate records of all such donations. Phil Dyer, CFP, explains the new rules and how they affect you. C Want to Contribute to a Good Cause? ■ As you plan your 2007 charitable contributions, remember that the Scholarship Fund of MOAA is a qualifying public charity and that 100 percent of money donated goes to assist the children of military families with grants and interest-free loans. Find out more at www .moaa.org/education. haritable donations can be a great way to give back to the community and get a tax deduction in the process. The Pension Protection Act of 2006, however, brought some new wrinkles to charitable deductions (most of which were retroactively implemented in 2006) that taxpayers need to know to stay out of trouble. One of the biggest changes — and the one most likely to catch taxpayers unawares — is the need to keep accurate records for all charitable contributions. The following rules now apply. Cash. For cash donations under $250, written records in the form of a cancelled check, bank statement, or written communication from the charity (a receipt or letter containing the charity’s name, the date of the contribution, and the amount) must be maintained. Cash donations in excess of $250 require a written receipt from the charity (a cancelled check will not sufﬁce). Non-cash goods. The IRS (and charities) is cracking down on donations of ragged underwear and broken toys. Donated goods now must be in “good condition” — essentially usable or in working order — or they will be rejected and no deduction will be allowed. Donors of single clothing or household items worth more than $500 must include an independent appraisal with their taxes to justify the deduction. High-value items. Any donation of property valued at more than $5,000 (artwork, vehicles, computer equipment, or other high-ticket items) requires a qualiﬁed appraisal, and the donor must ensure the charity uses the item for at least three years (up from two years) to receive a write-off for the full fair market value (FMV). Failure to adhere to both these rules can result in the IRS disallowing the FMV deduction and forcing donors to use their cost basis instead. A welcome rule for those aged 701⁄ 2 and older with large IRAs and charitable intent is the ability to donate up to $100,000 directly from an IRA to a qualiﬁed public charity (donor-advised funds and private foundations do not qualify). Unlike a regular monetary donation, donors do not get an income tax deduction for contributions from the IRA, but they also don’t have to pay income taxes on the amount donated. The donation also counts toward the required minimum distribution from IRAs and other retirement plans, which could allow qualifying donors to lower their tax bills. This provision is due to expire at the end of 2007, but there is signiﬁcant pressure from charities to extend it, as it is proving popular. One caution on this strategy is that many brokerage houses and IRA custodians are expected to cut off transfers by Dec. 15, 2007. Ensure you make timely arrangements if you plan to donate this year. MO — Former Army Capt. Phil Dyer, CFP®, is deputy director, Beneﬁts Information and Financial Education. To ﬁnd a ﬁnancial planner near you, contact Garrett Planning Network at (866) MOAA-GPN (662-2476) or www.moaa .org/garrett, or visit www.moaa.org/ﬁnancial center for other resources. PHOTO: SEAN SHANAHAN 42 MILITARY OFFICER J U LY 2 0 0 7 http://www.moaa.org/education http://www.moaa.org/education http://www.moaa.org/garrett http://www.moaa.org/financialcenter http://www.moaa.org/garrett http://www.moaa.org/financialcenter

Table of Contents Feed for the Digital Edition of Military Officer - July 2007

Military Officer - July 2007 Contents From the Editor From the President Your Views MOAA Directory Rapid Fire Washington Scene Financial Forum Ask the Doctor Chapter Activities Cover Story: In Focus After the Kim Dynasty Animal House Paying Tribute MOAA Member Services Pages of History Faces of MOAA Information Exchange Advertising Index MOAA Scholarship Donors MOAA Calendar Sounding Taps Encore

Military Officer - July 2007

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