The new Pension Protection Act of 2006 contains an important change for charitable contributions. Effective immediately, all tax deductions for charitable donations of cash gifts must be backed up by a bank record or a letter from the charity. If you rely on a letter, it must include the organization’s name as well as the date and amount of the contribution. Under prior law, such substantiation was required only for gifts of $250 or more.
Therefore, if you want a tax deduction now, you can’t just give away money to charity. If you go to church every week, for example, and donate cash when a collection is requested, you won’t be able to deduct those amounts, no matter how much you contribute.
One solution to this problem is to give a note instead of cash: this note can be a pledge of a future donation. Every month or so, fulfill your pledges with a check. The cancelled checks will serve as proof of your contributions, for tax purposes.
