Charitable Contributions

When you give away cash or goods to qualified nonprofit organizations, you may be able to take a tax deduction.  It's important to be aware of the IRS requirements and limitations as they relate to tax deductions for charitable donations.  Some of these requirements and limitations are explained here.  However, if you have questions or are not certain that a donation qualifies, please call our office and we will be happy to advise you.

Qualified Charitable Organizations - Not all nonprofit organizations are a "qualified U.S. organization".  The IRS regularly publishes a list of the organizations that do qualify.  Typical examples of qualified organizations include churches, nonprofit hospitals, colleges and universities, school booster clubs, libraries, public parks and recreation facilities, etc.

Limits on Charitable Contributions - In general, deductions for your charitable gifts are limited to 50% of your adjusted gross income.  However, depending on the kind of organization and type of property you're giving, that limit can dip as low as 20%.  And if your income is high enough, you can lose partial benefit of your charitable deductions due to an overall limit the IRS imposes on itemized deductions.

Gifts That Return A Benefit To You - If you are audited on your contributions, the IRS looks to see whether you intended to make voluntary donations or whether you were just paying for services provided by a charitable organization.  For example, payments to a parochial school for a child’s tuition or to a church for a family wedding give you a benefit but do not qualify as contributions.  Neither do purchases of raffle tickets, lotteries or bingo.  If you receive a partial benefit for your donation, you can generally deduct the amount of your gift that is over and above the value of what you receive.  For instance, if you paid $50 to attend a fundraising dinner at your church and the value of the meal and program is $15, you may claim a donation of $35.  The amount of payment minus the determined value.

Donating Your Time - If you do volunteer work for a charitable organization, the value of your time is not deductible.  However, if you incur out of pocket expenses related to your volunteer work such as travel cost to and from the charity's locations, those costs are deductible.

Record Keeping for Donations -

• Cash gifts; you should have a canceled check or a receipt from the donor.  In addition, for each gift of $250 or more, you must obtain a timely acknowledgment of your gift from the donor organization or the deduction will not be allowed. 
• Non-cash donations; Keep a list of items you donate that contains a description of the property, its cost and fair market value (FMV), when and how you acquired it and its condition (poor, fair, good, new).  Also include the name and address of the charitable organization.  Consider the condition of the item and use resources like classified ads, garage sales and thrift shops to help you determine the value of your donation.  For your convenience, we have provided a guideline with a suggested value range.