March 9, 2006 | Read Time: 1 minute
The Internal Revenue Service has announced several changes affecting charitable donations for the 2006 tax year, updating tax rules to take inflation into account.
One change affects the way donors calculate their charitable deductions. Federal law allows donors to take deductions only for the portions of their contributions that are outright gifts. If donors receive any item of value in return, they must subtract the cost of such items. Contributors may ignore token items they receive from charities.
The revenue service said that a charity could tell a donor that gifts were fully deductible if:
-
The donor contributed $43 or more and received premiums that cost $8.60 or less. In 2005, those figures were $41.50 and $8.30.
-
The donor received premiums that had a fair market value equal to no more than 2 percent of the amount of the contribution, or $86, whichever was less. In 2005, the dollar figure was $83.
-
The donor received appeals that contained small items — such as mailing labels — that were worth a total of no more than $8.60. The figure was $8.30 last year.
The IRS also announced new threshold figures for taxpayers who are affected by a limit on overall deductions, including those for gifts to charitable organizations. In 2006, taxpayers with adjusted gross incomes of $150,500 or more will have to subtract from their deductions 3 percent of the amount by which their income exceeds that amount. The income figure was $145,950 in 2005 (Revenue Procedure 2005-70, Internal Revenue Bulletin 2005-47).
