Records needed of charitable gifts vary by amount
Q: I find the IRS rules for charitable contributions to be very confusing. It was my understanding that a charity must provide written documentation of gifts of $250 or more but that smaller gifts need not be specifically substantiated. But I also read that any gift has to have some written record provided. What’s the point of the $250 statement if everything has to be substantiated? The tax law has gradually increased the required substantiation for claiming charitable deductions, and what was once a requirement only for single gifts of $250 or more has since been expanded.
There is a difference between the substantiation requirements, and additional substantiation is required for gifts of $250 or more.
If a single gift of $250 or more is made, the taxpayer must receive a written acknowledgement from the charity by the earlier of the tax return due date or filing date for the year of the gift.
The charity’s acknowledgement must include (1) the name of the charity (2) the date of the gift (3) the amount of the gift, and (4) a statement of any item(s) of value received by the donor in exchange for the gift.
The required substantiation for gifts of $250 or more applies even if the donor has a canceled check made payable to the charity. Without the substantiation no tax deduction is allowed.
The requirement for gifts below $250 is not as extensive. The taxpayer must have either a bank record or a written record from the charity to substantiate the gift.
This means that a canceled check is acceptable substantiation for gifts below $250. If the gift made is cash, a written record could be a receipt from the charity. A receipt should have the charity’s name, the date of the gift, and the amount of the gift. But it need not say that the donor did not receive anything of value in exchange for the gift.
You may be used to a formal 8½-by-11-inch letter from a charity for gifts of $250 or more. A receipt for gifts below $250 could be a receipt ripped out of a receipt book.
And while a canceled check is not sufficient for gifts of $250 or more, it will work for gifts below $250.
Q: I bought a house that I intend to use as a rental. The closing was Aug. 11. I am installing granite countertops, new stucco, a new roof and new carpet. I am doing some of the work myself and expect this work to be done in a few weeks. My question is whether I start depreciating the rental house in August and also whether things like property taxes, interest, utilities and insurance from Aug 11 forward are deductible.
Depreciation is available from the date the property is “placed in service.” This means that the property is available for its intended use, which, in your case, would be the date that the property was available to be rented.
You should start depreciation when the property is made available to potential tenants. You can claim depreciation even for periods that the property is not rented provided you are making efforts to rent.
The depreciation period for a residential rental property is 27.5 years, beginning with the month the property is available for rent.
The tax law also uses the “mid-month convention” for rental property, which means that you assume the property was placed in service in the middle of the month that it was made available for use.
So, if the property is made available to prospective tenants in October, you would claim 2½ months depreciation in 2017, assuming the property was placed in service in the middle of October.
Property taxes and interest can be deducted even for periods the property is not available for rent.
All interest and utilities should be deductible. Courts have held that even a single rental property can be a business. If so, utilities and maintenance would be “Section 162” business expenses.
Business expenses incurred in periods before the business starts (before the rental period begins) are called “start-up” expenses. As much as $5,000 of start-up expenses may be deducted in the year incurred.