Cash & clothing donations

The Pension Protection Act made changes related to how taxpayers document their cash and clothing donations.

Cash donations

Before the new law, taxpayers did not need to document monetary donations less than $250.

Starting in 2007, taxpayers will need to keep receipts documenting all monetary donations they claim as a charitable deduction on their tax return.

"Now, for any monetary gift, you need a bank receipt or written acknowledgement from the charity, including charity's name, the date of the gift, the amount of the gift."

A cancelled check or a credit card statement will also suffice. Taxpayers' best bet is to avoid cash donations and instead focus on check or credit card payments.

Taxpayers don't send these receipts to the IRS, but simply keep with their records in case of an audit.

Clothing donations

The new rule for clothing and other household donations which goes into effect for 2006 is that they must be in good or better condition to qualify for the deduction.

The law does not specify what "good" or "better" means, but taxpayers might consider taking photos of the items or getting a written acknowledgment from the charity that the items are in such conditions.

Make a detailed list of the items, such as "three pairs of pants, two shirts." Then the charity can acknowledge the exact items were received in "good" or "better" condition.