New Rules for Charitable Donations

Does your nonprofit accept donations of used items for either resale or use by your low-income clients? You should be aware of new rules from the IRS regarding deductibility of these items. Items that are not in "good" (or better) condition will no longer be deductible.

Old TVs that won't don't work? Games missing half the pieces? No deductions here anymore. This is bound to upset some people who regularly empty their closets and garages at our doors (in exchange for a tax break), but it could be a benefit to the sector over all.

I know that when I've worked with nonprofit organizations that accept in-kind donations from individuals, we've always stressed "gently used" items, but it's difficult to get the volunteers and staff who accept these items to enforce that rule. Much of what we've accepted (and given receipts for) has ended up in the dumpster.

Staff and volunteers will have to be trained in the new rules, and be more strict - but still polite - about rejecting certain donations. According to Dave Barringer, vice president of member relations at Goodwill Industries International, the new rules will reinforce what we've all been trying to say all along: "This isn't a place to dump trash."

The only trouble with enforcing the new rules is this: who defines what is "good" condition? Your donor may think the item is worthy, but I believe it is up to the organization to be brutally honest regarding whether the item is usable or not.

Other changes in deductibility rules:
* Any individual item valued at more than $500 must be appraised before the taxpayer can take a deduction.
* All cash donations now require a receipt, cancelled check, or bank record to take a deduction. (No more estimating how much cash you've given in small amounts over the year).

Some donors will try to use that last rule to get out of giving you a small cash donation at public events (neighborhood art festival booths, etc.). Whereas you might have gone into such situations before with just a cash box, you should now be willing to write out receipts on the spot for even the smallest donation.

NOTE: I apologize about having not posted for over a week. I am wrapping up a major project with a client right now and haven't had the time to post regularly. I will be back to regular posting - and have a great case study for you - in another couple of weeks.

Tags: nonprofit, donations, tax deductions, IRS rules