Give smarter
Charitable donations are great, but beware of new tax legislation that limits the deductions you can claim on donated items.
By Ellen McGirt, Fortune senior writer

(Fortune Magazine) -- This year some important changes are likely to tax the patience of any charitable giver. Buried in the Pension Protection Act of 2006, passed in August, are some new limits to the deduction you can claim for your clothing and household items. To be eligible for donation, the item has be in "good used or better condition," which has not been further defined by the IRS.

Keep a list of what you donate, along with approximate fair value. (You may want to take a photo as well.) You can still deduct the value of an item that isn't in good condition or better if the amount claimed is more than $500 - and if you include a qualified appraisal with your tax return.

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More information will eventually be found in IRS publication 526 when it's updated. And take your deductions with care. If you overstate the amount of your noncash charitable donation you'll pay more in penalties from now on - 20 percent of the understated tax liability if you overstate your charitable donation by at least 150 percent, and 40 percent if you overstate the deduction by 200 percent or more.

Next steps:

5. Review your health plan

6. Clean up your taxable account

7. Do a property insurance checkup

8. Check the new credits and taxes

Previous steps:

1. Rebalance your 401(k)

2. Revisit your estate plan

3. Sock it away

4. Give smarter

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