With Giving On The Rise, Taxpayers Need To Be Aware Of The Tax Rules And Benefits Of Claiming Charitable Contributions On Their Tax Returns

Jackson Hewitt® Provides Helpful Information on the New Charitable Claim Rules of Giving in 2006

(Tuesday, December 05, 2006) - Jackson Hewitt Tax Service®, an industry leader providing full service individual income tax preparation, notes that while more and more people are donating to charities, they may still be unsure of how to record and properly claim donations on their tax return. Incorrectly deducting donations can result in taxpayers missing out on a possible larger refund or reducing the amount of tax liability owed.

Research shows that 89 percent of households already make some kind of charitable contribution(1), and a recent Chronicle of Philanthropy survey estimates that donations to charities will increase by 13 percent this year. "As a country that gives greatly to many worthy causes, tax filing season provides a great opportunity to reap a tax benefit for such efforts," comments Mark Steber, Vice President of Tax Resources, Jackson Hewitt Tax Service Inc. "Yet many taxpayers may be overpaying taxes every year by underestimating the value of the donations that they do itemize."

Steber notes that the IRS has issued new rules this year concerning the condition of donated items, as well as the documentation requirements. "Taxpayers who know about these changes can now make sure to take all necessary steps and file contributions correctly on their 2006 tax return," he said.

The IRS considers a charitable contribution to be a voluntary donation or gift to a qualified organization. In addition to money or property, deductible charitable contributions also include out-of-pocket expenses incurred while volunteering for a qualified organization and expenses paid to cover student living costs if he or she is sponsored by a qualified organization. Deductions can be claimed by filing Form 1040, U.S. Individual Income Tax Return, and itemizing deductions on Schedule A, Itemized Deductions.

Condition of Donations
The IRS has stated that all goods donated after August 17, 2006, must be in at least "good" condition to be eligible for a tax deduction on a 2006 tax return. If an item is only in "fair" condition, it can be deducted only if it is valued at over $500 in a written appraisal.

To make this assessment, donors can survey thrift and consignment stores for similar items to determine the fair market value. Another option is to ask a local Jackson Hewitt tax representative about the "ItsDeductible®*" program, which provides accurate values for hundreds of commonly donated items so filers can maximize their charitable deductions.

"It is often hard to assess the value of items you are donating to a charity, particularly in light of the new IRS rules," notes Steber. "Working with a knowledgeable tax preparer can help you determine the correct assessment for donations of clothing, toys, furniture, or other household items."

Documentation Changes
Another recent change that will impact how contributions are claimed on 2007 tax returns concerns keeping track of donations. For tax years starting after August 17, 2006, a receipt, cancelled check, or bank record may be required as proof of a charitable contribution. Prior to this, only contributions of $250 or more (for a single item) required receipts or bank records. While it is not necessary to provide these items with a 2007 tax return, they are necessary in the event of an audit. Getting into the habit now of saving receipts and copies of cancelled checks can make claiming charitable deductions easier.

In general, charitable contributions may only be deducted on the tax return in the year the contribution was made. The year of a financial donation is determined by the date when a check is mailed or when a credit card is charged. In addition, the amount of the tax deduction may be limited depending on the type of contribution and the type of organization to which the contribution is made. Some contributions that are not deductible in the current year because of adjusted gross income limits may be carried over to future years.

New Option for Seniors to Donate from an IRA
Under the Pension Protection Act of 2006, individuals ages 70-1/2 and older now have the option of making a tax-free distribution (up to $100,000 per year) from their traditional individual retirement account (IRA) or Roth IRA to a charitable organization. Taxpayers benefit from this new rule because the IRA-distributed funds are excluded from the taxpayer's taxable income for the year; no income tax is paid on the IRA distribution.

According to Steber, donating an IRA distribution to a charity has traditionally been expensive, because the taxable income created was not offset 100 percent by the charitable deduction. These new provisions, in effect for two years only through December 31, 2007, eliminate the taxation and deduction, allowing all of the IRA distribution given to charity to be free of income tax.

"Making a charitable contribution of money or items is an easy and effective way to lower taxes, provided that you get into the practice of keeping receipts and itemize on your return," comments Steber. "Tax benefits associated with charitable donations often go unnoticed, but with more and more people giving money or gently-used items to those in need, there is also an opportunity to deduct the fair market value of donations if you itemize."

To find a local Jackson Hewitt office, visit www.jacksonhewitt.com or call 1-800-234-1040 for locations.

1. Giving & Volunteering in the United States 2001, Independent Sector

*Additional fees may apply. ItsDeductible is a registered trademark of Intuit Inc. in the United States and other countries.

About Jackson Hewitt Tax Service Inc.
Jackson Hewitt Tax Service Inc. (NYSE: JTX), with over 6,000 franchised and company-owned offices throughout the United States during the 2006 tax season, is an industry leader providing full service individual federal and state income tax preparation. Most offices are independently owned and operated. The Company is based in Parsippany, New Jersey. More information may be obtained at http://www.jacksonhewitt.com. To locate the Jackson Hewitt Tax Service office nearest to you, call 1-800-234-1040.

CONTACT:
Allison Jackson
Senior Manager, Communications
Jackson Hewitt Tax Service Inc.
973-630-0681
allison.jackson@jtax.com

Melissa Connerton
CooperKatz & Company
212-455-8001
mconnerton@cooperkatz.com

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