Year End Charitable Contribution

IRS Offers Tips for Year-End Donations via IR-2008-138.
Individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years.

Special Charitable Contributions for Certain IRA Owners-
An IRA owner, age 70 ½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charitable organization. This option, created in 2006 and recently extended through 2009, is available to eligible IRA owners, regardless of whether they itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.
To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity. Amounts so transferred are not taxable and no deduction is available for the amount given to the charity.
Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.
Transferred amounts are counted in determining whether the owner has met the IRA’s required minimum distribution rules.
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Rules for Clothing and Household Items-
To be deductible, clothing and household items donated to charity must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to be in good used condition or better if the taxpayer includes a qualified appraisal of the item with the return. Household items include furniture, furnishings, electronics, appliances, and linens.

Guidelines for Monetary Donations-
To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, 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.
For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
Also, a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more.

Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the year count for 2008. This is true even if the credit card bill isn’t paid until next year. Also, checks count for 2008 as long as they are mailed this year.
Check that the organization is qualified to receive a deduction.

For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value.Additional rules apply for a contribution of $250 or more.

The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value of the vehicle is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.
Source-IRS website.

Interest Rates Drop - IRS

The Internal Revenue Service today announced in Revenue Ruling 2008-54 that interest rates for the calendar quarter beginning Jan. 1, 2009 will drop by one percentage point. The new rates will be:
Five (5) percent for overpayments [four (4) percent in the case of a corporation];
Five (5) percent for underpayments;
Seven (7) percent for large corporate underpayments; and
Two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate during October 2008 to take effect Nov. 1, 2008, based on daily compounding.
source-http://www.irs.gov/newsroom/article/0,,id=201115,00.html

Buying a SUV for business - Time is running out for the tax break!!

If you are considering purchasing a new SUV (whose weight exceeds 6,000 lbs) for the tax year 2008 and the vehicle will be used 100% in business, than the IRS offers incredible tax breaks up until December 31, 2008.
For example if you are going to buy a new SUV for $45,000 before the current 2008 year end, and the SUV meets the IRS statutory weight requirement of >6,000 lbs, then you can get a tax write-offs of upto $37,000.

Here is the math to help you understand this deduction-
1. You are entitled to write-off $25,000 of the initial cost in the first year.
2. An amount equal to 50% of the balance of the cost $20,000 can be claimed as an additional BONUS depreciation, which adds to an additional $10,000
3. The remaining balance of the cost which is $10,000 can be depreciated over 5 years which may result in an additional $2,000 as regular depreciation.
Thus, in the tax year 2008 the taxpayer can actually get a deduction of $37,000 for purchasing a SUV at $45,000.

Considering that you are in high tax bracket, buying a SUV could give you a considerable tax break.

So, Act now...before the time runs out!