MAKING CENTS: Guidance on last-minute contributions

Many have spent the last month racking their brains thinking about gifts for their loved ones, friends or service providers. Yet when it comes to charitable contributions, many simply give at the end of the year without much thought about the tax consequences.

Cash works great, and is most sought after by charitable organizations with tight operating budgets. But try not to use greenbacks, the IRS will disallow contributions made with cash unless there is substantial other documentation available to prove the contribution.

If you give clothing and household items, you may generally take a deduction up to the fair market value of the property. The property must be in good used condition or better, and supported by documentation from the charity about what was received. For substantial deductions, keep a list and maybe even a few photos of what was given to support your deduction.

Cars, boats and planes have their own special rules. A few years back the rules were changed from looking at the wholesale book value to the actual cash proceeds. Your deduction is limited to the actual cash sale proceeds from that asset, which could be much lower than the book value. The charity will send you a form 1098-C which must be attached to your return stating the sale proceeds.

If you donated a week of use in your vacation home for the local church auction you will not get a deduction. The person who steps up at the auction and writes the check for the weekly rental typically gets no deduction either. The only way for the buyer of the week to receive any tax benefit would be if the price paid for the rental was in excess of the fair market value. And in that case, it would be only the excess payment over fair market value that would have any tax benefit.

I frequently get asked about deducting the value of services provided to a qualified charitable organization. The general answer is that you receive no deduction for the value of services contributed to a charitable organization.

Own a business and have excess inventory, gift it. As long as the inventory was valued on the books at the beginning of the year, you may receive a deduction in the year of the gift.

Gifting rules get tricky if you use anything other than cash. Be sure to check with IRS publication 526, your CPA or qualified tax advisor before making any contributions that you are not sure about.

John P. Napolitano is CEO of U.S. Wealth Management in Braintree, Mass., and 2012 president of the Financial Planning Association of Massachusetts. He may be reached at jnap@uswealthcompanies.com or on Facebook as JohnPNapolitano and US Wealth

John Napolitano is a registered principal with and securities offered through LPL Financial. Member FINRA/SIPC. He can be reached at 781-849-9200.

Securities offered through LPL Financial, Member FINRA/SIPC.

Investment advice offered through U.S. Financial Advisors, a registered investment advisor and separate entity from LPL Financial. The LPL Financial Registered Representatives associated with this site may only discuss and/or transact securities business with resident of the following states: AL, AR, AZ, CA, CO, CT, DC, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, NC, ND, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, TN, TX, UT, VA, VT, WA, WV. USFA, and U.S. Insurance Brokers, LLC are wholly-owned subsidiaries of U.S. Wealth Management. U.S. Wealth Management companies are not affiliated with LPL Financial.

The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.