Contributing money and property are ways that you can support a charitablecause, but in order for your donation to be tax-deductible, certain conditionsmust be met. Read on for six things the IRS wants taxpayers to know aboutdeductibility of donations.
1. Tax-exempt status. Contributions must be made toqualified charitable organizations to be deductible. Ask the charity about itstax-exempt status, or look for it on IRS.gov in the Exempt Organizations SelectCheck, an online search tool that allows users to select an exempt organizationand check certain information about its federal tax status as well asinformation about tax forms an organization may file that are available forpublic review. This search tool can also be used to find which charities havehad their exempt status automatically revoked.
2. Itemizing. Charitable contributions are deductibleonly if you itemize deductions using Form 1040, Schedule A.
3. Fair market value. Cash contributions and the fairmarket value of most property you donate to a qualified organization areusually deductible. Special rules apply to several types of donated property,including cars, boats, clothing and household items. If you receive somethingin return for your donation, such as merchandise, goods, services, admission toa charity banquet or sporting event only the amount exceeding the fair marketvalue of the benefit received can be deducted.
4. Records to keep. You should keep good records ofany donation you make, regardless of the amount. All cash contributions must bedocumented to be deductible – even donations of small amounts. A cancelledcheck, bank or credit card statement, payroll deduction record or a writtenstatement from the charity that includes the charity’s name, contribution dateand amount usually fulfill this record-keeping requirement.
5. Large donations. All contributions valued at $250and above require additional documentation to be deductible. For these, youshould receive a written statement from the charity acknowledging your donation.The statement should specify the amount of cash donated and/or provide adescription and fair market value of the property donated. It should also saywhether the charity provided any goods or services in exchange for yourdonation. If you donate non-cash items valued at $500 or more, you must alsocomplete a Form 8283, Noncash Charitable Contributions, and attach the form toyour return. If you claim a contribution of noncash property worth more than$5,000, you typically must obtain a property appraisal and attach it to yourreturn along with Form 8283.
6. Timing. If you pledge to donate to a qualifiedcharity, keep in mind that for most taxpayers contributions are only deductiblein the tax year they are actually made. For example, if you pledged $500 inSeptember but paid the charity just $200 by Dec. 31 of that same year, only$200 of the pledged amount may qualify as tax-deductible for that tax year.End-of-year donations by check or credit card usually qualify as tax-deductiblefor that tax year, even though you may not pay the credit card bill or haveyour bank account debited until after Dec. 31.
Bottom line: your support of a qualified charitable organization may provideyou with a money-saving tax deduction, but conditions do apply. For more information,see IRS Publication 526, Charitable Contributions, and for information ondetermining value, refer to Publication 561, Determining the Value of DonatedProperty.
Links:
- Exempt Organizations Select Check
- Schedule A (Form 1040), Itemized Deductions
- Form 8283, Noncash Charitable Contributions
- Publication 526, Charitable Contributions
- Publication 561, Determining the Value of Donated Property
- Tax Topic 506 - Charitable Contributions
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