Document Those Gifts to Charity
Q. My wife and I are remodeling the kitchen and are interested in donating our old appliances to the Salvation Army or a similar organization. What documents should we get to authenticate this donation to have it qualify as a charitable contribution on our taxes? --S.L.
A. If you contribute a minimum of $250 to a charity, you must get a written receipt from the organization acknowledging the donation. (A canceled check is not sufficient evidence of a cash donation of $250 or more.)
The receipt can be a simple as a letter, computer-created form or even a postcard. The exact amount of any cash donation must be noted; contributions of property must be described on the receipt or acknowledgment, but the charity is not required to value it.
The receipt must also say whether you have received any goods or services from the charity in exchange for the donation. If so, the charity must describe those benefits and estimate their value.
If you claim a deduction for property valued at more than $500, you must attach Form 8283 to your Form 1040. Failure to do so could result in the Internal Revenue Service’s disallowing your deduction.
If the value of your claimed donation exceeds $5,000, you may also have to obtain a written appraisal. In these cases, the appraiser must complete Part III in Section B of Form 8283.
However, you do not need a written appraisal for donations of publicly traded securities and for non-publicly traded stock valued at $10,000 or less.
For property donations exceeding $5,000, the recipient organization must acknowledge receipt of the gift in Part IV of Section B of Form 8283.
Finally, if the charity sells the donated property for which you took a deduction of $500 or more within two years of receiving it, it must notify the IRS on Form 8282 and send you a copy. The IRS could compare the Form 8283 you filed at the time of the donation with the Form 8282 the charity files to check for discrepancies.
Tax Base Transfer Program Is Limited
Q. Which counties in California participate in the Prop. 90 program that allows older homeowners to transfer their property tax base upon moving? K.F .
A. Just 10 counties now allow homeowners over age 55 to transfer their existing property tax assessed value from another county upon moving into that county. They are Alameda, Kern, Los Angeles, Marin, Modoc, Orange, San Diego, San Mateo, Santa Clara and Ventura. Three counties that once participated in the program--Inyo, Contra Costa and Riverside--have dropped out.
That said, let’s explain more about the programs that allow home buyers over age 55 special exemptions to the otherwise automatic Prop. 13 property tax reassessment.
As you may know, under the Jarvis Initiative, or Prop. 13, approved by California voters more than 15 years ago, the assessed value of a home was rolled back to March, 1975, levels and allowed to increase just 2% each year until it was sold. Then, its assessed value was automatically set at essentially its sales price. Actual property taxes are limited to about 1.25% of the assessed value.
However, older homeowners, many of whom supported this proposition, were stunned by the impact of the initiative when they sold their homes and discovered that even though they were trading a large home for a smaller one, they were getting a higher assessed value--and property tax bill--in the bargain. How? Consider the couple who had owned a home valued at $60,000 in 1975. They may sell it 15 years later for $300,000 and purchase a $200,000 retirement condo. However, the assessed value of their new home--and their property tax bill--would be more than twice what they had been paying on the house covered by the Prop. 13 rollback.
With the help of the real estate lobby, California voters in 1986 approved the first significant exception to Prop 13. Home sellers over age 55 were allowed to keep the assessed value of their old home if they purchased a new home of equal or lesser value in the same county. Two years later, the voters approved yet another exception, this time allowing home sellers to transfer the assessed value of their old home to a new home of equal or lesser value anywhere in the state. The only restriction was that the county into which they were moving had to agree to participate on the transfer program.
At one point, 13 counties agreed to participate. But then county government officials realized that the program essentially restricts the amount of property tax revenue they can collect without offering any decrease in public services.
Few Exceptions for Early Medicare
Q. I am age 63. Is there any way for me to begin drawing Medicare before turning 65? My husband is getting Social Security and I am getting spousal benefits on his account. May I get Medicare on his account as well? --A.C.
A. Generally speaking, you must be 65 to begin drawing Medicare benefits. There are just two exceptions to this: If you are disabled and have been drawing Social Security benefits for 24 months, or if you are receiving kidney dialysis or are awaiting a kidney transplant.