The IRS says that charitable contributions are deductible only if you itemize deductions and they are deductible only if you make contributions to qualified charitable organizations. The tax agency reminds us that contributions to individuals are never deductible.
But how do you know that the charity you are donating to qualifies? You can determine whether the organization qualifies as a charity for income tax deduction purposes by referring to the agency’s Tax Exempt Organization Search tool.
What if you receive a benefit from the contribution — such as a public TV station offering a DVD of the program you were just watching — or other goods or services? What about obtaining admission to a charity ball or banquet, or tickets to a theatrical performance or sporting event for your donation? The IRS says you only can deduct the amount that exceeds the fair market value of the benefit received.
Then there’s the sticky problem of contributing cash, checks or any other monetary gift —how should you handle this? The tax agency recommends that you maintain a record of the contribution.
- It can be a bank record or contemporaneous written communication from the qualified organization. It should contain the name of the charity along with the amount and date of the contribution.
- You generally can deduct the fair market value of any other property you donate to qualified organizations.
- For a contribution of $250 or more — including cash and property — you must obtain and keep in your records a written acknowledgment from the qualified organization that indicates the amount of cash and a description of any property contributed.
- Make sure that the acknowledgment says whether the organization provided any goods or services in exchange for the gift. If yes, you need to provide a description and a good-faith estimate of the value of those goods or services.
- A document from the qualified organization may satisfy both the written communication requirement for monetary gifts and the contemporaneous written requirement for all contributions of $250 or more.
For a deduction of a noncash contribution that’s more than $500, fill out Form 8283, Noncash Charitable Contributions, and attach it to your tax return. You’ll also need a qualified appraisal of the noncash property and you must fill out Form 8283, Section B, to claim the deduction for the noncash contribution of property worth more than $5,000.
You also should know that special rules apply for donations of certain types of property that have appreciated in value, including the following:
For more information, you can refer to Publication 526, Charitable Contributions. If you need to determine the value of your noncash contributions, you can take a peek at Publication 561, Determining the Value of Donated Property.
If you have questions, contact an MCB Advisor at 703-218-3600 or click here. To review a summary of recent articles related to exempt organizations, click here. To learn more about MCB’s Not-for-profit practice, click here. To learn more about MCB’s tax practice and our tax experts, click here.