Richard J. Harris, CPA – Newport Beach, CA

Thinking of fixing up the old digs?  Doing so may save you some taxes.  Here’s the deal.

This thing called ARRA (The American Recovery and Reinvestment Act) Section 25C tells me that if you install new qualifying insulation or exterior windows and doors, metal roofs (including skylights) and various and sundry way efficient heating and cooling systems you can garner yourself up to a $1,500 federal credit.  (Inquire about possible state credits based upon where your home is located.)  Well the dollars aren’t huge, however remember, you will be saving on the monthly utility bills.  And oh-by-the-way, you will sleep the sleep of the righteous and true.

Also exciting is ARRA Section 25D. (I live for this!)  Here you are going to get credit for state-of-the-art residential green energy systems such as solar- and wind-generated power systems.  Note too that these credits apply to rental and vacation homes as well.  Some of the systems that qualify are geothermal heat pumps, solar panels, solar water heaters, small wind energy systems and fuel cells.  My buddy who lives up in the Sierras tells me that solar water heaters (he uses them to heat his floors as well) work just fine through most winters.

If you’re thinking of building a new home or doing a major remodel, ask your architect about LEED (Energy and Environmental Design) standards and what credits and advantages can be had for “going green.”

Let’s talk electric meters.  That thing with all the funny dials that no one knows how to read has been up-dated.  Go digital!  If monitoring how much electricity you’re using impresses you as a good thing, digital is the way to go.  By evening out your electricity usage, your utility bills will go down.  This because the power companies often charge according to the maximum demand made during each billing period.  Lower the maximum and you lower the bill.

It’s all good (and green too).

Rick Harris Income Tax Advice energy tax credits, Income Tax Advice

When I’m sitting in an income tax audit and produce an old, crumpled up Goodwill receipt with only “4 bags of household goods” as detail, I know what’s coming.  They ask for more evidence and substantiation for the deduction – seems reasonable to me.  More often than not, there is none.

Most of us give our old clothes, furniture, etc to the Goodwill, Salvation Army or similar organization.  Most all of us deduct the value of these goods on our tax returns.  While the IRS is fine with the idea, the details can become problematic. 

Want to nail down your deduction?  Here’s what you need to know and do.

First and most important – the organization has to be a qualified, non-profit organization, i.e., the Goodwill or Orange County Child Abuse Prevention Center. 

Next, follow the rules outlined below.

NON CASH DONATION VALUED AT LESS THAN $500:

The goods donated must be in “good used condition or better”.

Get a receipt or other written acknowledgment showing the date, name and address of the organization, condition of the goods and value you are assigning to those items.

A detailed itemization is strongly suggested.

Take pictures!

If a receipt is impractical and the value is less than $250, write out your own receipt detailing the donation and circumstances.

NON CASH DONATION VALUED FROM $500 TO $5,000:

Written acknowledgment from the charity showing the date, name and address of the organization, condition of the goods and value you are assigning to those items.

Make a record of when and how you acquired each item, the amount paid, the donated value and how you arrived at that value.  (Not as hard as it sounds – estimated date; “purchase”; $5000; $500; Thrift Store selling price.)

Take pictures!

NON CASH DONATION OF A SINGLE ITEM VALUED OVER $5,000:

Written acknowledgment from the charity showing the date, name and address of the organization, condition of the goods and value you are assigning to those items.

List the items by type of item being donated:

Art valued at $20,000 or less  *  Art valued at more than $20,000  *  Collectibles * Qualified Conservation Contribution  *  Other Real Property  *  Intellectual Property  *  Equipment  *  Securities  *  Other.

Detailed description of the property.

If tangible property – detailed description of the condition of the property.

Appraised Fair Market Value at date of gift.

Date acquired

How acquired

Cost

For Bargain Sales – the amount received.

Amount claimed.

Average trading price – if applicable.

IRS Form 8283 signed by you and the appraiser.

A signed acknowledgement from the charity on Form 8283.

There are more rules for various other categories.  If you’re planning on giving anything large or unusual, call me so you can be sure to cement down the deduction.

Sure it can be complicated, however, when you do donate and don’t take the time to do it right, you’re also giving a gift to Uncle Sam in the form of higher tax bills.   My suggestion – take the time and take the deduction.

Rick Harris Income Tax Advice charitible contributions