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Charity Caveats Changes in tax laws can affect your deductions for donated items.

By Jennifer Pellet

Opinions expressed by Entrepreneur contributors are their own.

Feeling philanthropic? Watch how you go about giving to your favorite cause. The Pension Protection Act, passed in 2006, brought some changes regarding charitable contributions, including making it tougher to get deductions for giving away noncash property, from old computers to old clothes. It also increased accountability for more intensive charitable efforts, such as donor-advised funds.

"In the past, noncash items were deducted for fair market value," says Lawrence J. Macklin, a wealth strategist with Bank of America Wealth & Investment Management in Baltimore. "That's still the rule, but now deductions are only allowed for items in 'good used condition or better.'" How the IRS and affected charities will define "good used condition" remains to be seen, but in the meantime, a safe bet would be to exercise discretion both when giving and valuing noncash donations.

Those who give through donor-advised funds, or DAFs (public charities set up to give on behalf of individuals or families), will also face greater scrutiny and restrictions. For example, DAFs are now prohibited from giving grants to individuals or to donors, donor advisors, their family members or any entities in which those individuals have more than 35 percent control.

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