In general. The tax law encourages charitable contributions by making them tax-deductible if certain conditions are met. It is important for church members to be familiar with these conditions. Some of them are summarized below.

Personal services. The value of personal services is never deductible as a charitable contribution, but unreimbursed expenses incurred in performing services on behalf of a church or other charity may be. For 2001 you can use a "standard mileage rate" of 14 cents to compute a deduction for any miles you drive in performing services for your church. Be sure to maintain accurate records in writing.

• Example. John is an electrician. He donates 10 hours of his time to a church construction project. He cannot deduct the value of his donated labor.

• Example. Several members of a church go on a short-term missions project to another country. The value of their labor is not deductible, but they can deduct their travel expenses ( transportation, meals, lodging) incurred in performing their project.

Year of contribution. Charitable contributions must be claimed in the year in which they are delivered. One exception is a check that is mailed to a charity – it is deductible in the year that check is mailed (and postmarked), even if it is received early in the next year.

• Example. Mary writes a check to her church on the last day of December in Year A and deposits it in the church offering on the first Sunday in January in Year B. The check is deductible in Year B.

• Example. Same facts as the previous example, except Mary mails (and postmarks) her check in Year A. The check is deductible in Year A even if the church does not receive it until Year B.

If the donor receives a benefit. Charitable contributions generally are deductible only to the extent they exceed the value of any premium or benefit received by the donor in return for the contribution.

Amount of deduction. There are limits on the amount of a contribution that can be deducted. A contribution deduction ordinarily cannot exceed 50 percent of a donor's adjusted gross income (a 30 percent rule applies in some cases). Donors who exceed these limits may be able to "carry over" their excess contributions and deduct them in future years.

Designated contributions. "Designated contributions" are those that are made to a church for a specified purpose. If the purpose is an approved project or program of the church, the designation will not affect the deductibility of the contribution. An example is a contribution to a church building fund. However, if a donor's contribution specifies that it be spent on a designated individual, then no deduction ordinarily is allowed unless the church exercises full administrative control over the donated funds. "Designated contributions" that ordinarily are not deductible include contributions to a church benevolence fund or scholarship fund that designate a specific individual. However, contributions to a church or missions agency that specify a particular missionary may be tax-deductible if the church or missions agency exercises full administrative and accounting control over the contributions and ensures that they are spent in furtherance of the church's mission.

• Example. A church member donates $200 to the church, and instructs the church treasurer to give the $ 200 to a designated needy family in the church. This contributions is not tax-deductible by the donor.

• Example. A church member donates $200 to a denominational mission agency, and specifies a particular missionary as the recipient. This contribution is tax-deductible, even though it names a missionary, so long as the mission agency has full administrative and accounting control over the funds.

• Example. A church member donates $100 to a church scholarship fund. No specific individual is designated. The contribution is tax-deductible.

Substantiation. Charitable contributions must be properly substantiated in order to be a tax-deductible. If you deduct your charitable contributions on your income tax return, be aware of the following points:

Canceled checks cannot be used to substantiate individual cash contributions of $250 or more. You must receive a written receipt from your church that satisfies a number of requirements. In general, the receipt must indicate whether or not the donor received any goods or services for any of these contributions (and if so, the value of the goods or services received). If the donor received no goods or services for the contributions, then the receipt must say so or indicate that only "intangible religious benefits" were received.

If you've made individual contributions of $250 or more, don't file your federal income tax return until you receive a contribution statement from your church that satisfies these requirements. Otherwise, your contributions may not be deductible.

In addition, if you make a contribution of noncash property to your church valued at $500 or more, some other special substantiation rules apply (see the instructions to IRS Form 8283). If the value is more than $5,000, then you must obtain a qualified appraisal of the property and attach an "appraisal summary" (IRS Form 8283) to the tax return on which the contribution is claimed.

About the author. A graduate of Harvard Law School, Richard Hummar is an attorney and certified public accountant specializing in legal and tax issues that affect churches and clergy.

*Used under copyright licensed permission.