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New Tax Rules For Charitable Gifts : Donations: The rewards for contributors have been revised, expanded in some ways, restricted in others.


NEW YORK — After the newest changes in the U.S. tax laws, charity still has its rewards.

But to the extent that Uncle Sam defines them, they have been significantly revised--increased in some ways, crimped in others.

The differences merit the attention of anyone who contributes money to a worthy cause or causes, and figures on taking a deduction at tax time.

One rule that has been tightened, for instance, covers the evidence necessary to support any deduction for a charitable contribution of $250 or more.

The new law specifies that a canceled check, one of the most commonly used forms of substantiation, isn't good enough. Instead, the person who claims the deduction must get from the charity a receipt of some sort that details the amount or value of the contribution.

While it is important to follow this rule, it should not present any problem in most cases beyond an extra bit of record-keeping requirements. Many charities already routinely issue receipts that appear to meet the requirements.

For anyone who wants to find a way around the rule, there appears to be a handy route.

"Separate payments generally will be treated as separate contributions, and will not be aggregated for purposes of the $250 threshold," says the accounting firm of Coopers & Lybrand.

"Thus, an individual who contributes $200 to a charity in March and $150 to the same charity in September will not be required to secure substantiation of either contribution."

In addition, if you make a payment exceeding $75 for something like a fund-raising dinner that represents part contribution, part purchase of goods and services, the recipient is supposed to issue what amounts to an itemized receipt.

This receipt spells out what part of the payment represents a deductible contribution, and what part is simply a purchase in exchange for value received--in other words, the dinner and entertainment.

The idea is to prevent tax write-offs for expenses that aren't contributions after all.

If you make enough money to be pushed into a higher marginal tax bracket by the new law, the value you derive from all charitable deductions goes up proportionately.

That blanket principle comes with one big caveat, however. Upper-income individuals and families also may encounter rules that curtail the itemized deductions they can take.

Not all the changes mandated by President Clinton's package are complications. One notable move toward simplicity comes in a provision that removes gifts of appreciated long-term assets to charity from the realm of the alternative minimum tax, or AMT.

This means you can enjoy the special benefits of donating a stock, bond or other asset that has increased in value since you bought it, without worrying that doing so will make you subject to the AMT.

"This can be a very smart move," says the newsletter Personal Finance in Alexandria, Va.

"A donation of assets that you've held for over a year and that have appreciated in value provides you with two benefits.

"You get to write off the current market value of the assets as a tax-deductible charitable contribution. You avoid any capital gains tax on the appreciation."

Under the former rules, that appreciation could trigger the AMT. Now, notes the accounting firm of Deloitte & Touche, "the full fair market value of contributed property will be deductible for both regular tax and AMT purposes."

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