Jul
Many times I am asked how a taxpayer can deduct charitable contributions on their returns. The questions often refer to the eligible organizations they can donate to and the documentation required. I will attempt to clarify these issues below.
How do I identify which organizations I can donate to and receive a tax-deductible contribution?
This is really the starting point. First realize that not every not-for-profit entity is necessarily the same for tax deduction purposes. The best way to determine whether an organization is eligible to receive tax deductible contributions is to go to the IRS website www.irs.gov and enter “Publication 78” in the search bar. You would then click on Search “EO” which stands for exempt organizations. You can search for the organization by name, address or federal identification number.
Once found there is a deductibility status column where you can click to see if the organization is a 50% or 30% organization. A 50% organization allows you to deduct contributions up to 50% of your Adjusted Gross Income (AGI). Examples of 50% organizations would include churches, educational organizations, hospitals and medical research organizations. Also keep in mind that many religious institutions are not listed on this website as they are not required to apply for tax exempt status.
A 30% organization allows you to deduct charitable contributions up to 30% of your AGI. 30% organizations include veterans’ organizations, fraternal societies and private foundations.
There are also instances where certain contributions of appreciated property result in reduced allowable percentages but those are beyond the scope of this article and if you are donating appreciated property you should consult a tax professional.
Substantiation Requirements
When making a donation to a charitable organization that is less than $250, you are required to keep the cancelled check, credit card receipt or proof you were charged on your telephone bill if it was via a text message. Contributions made by credit card are deductible in the year the charge was made. In other words if you charge a donation on December 31st but don’t receive the bill until January 15th and pay it in February it is still deductible in December. If you make a contribution by text message it is deductible when charged to the individual’s account.
For all noncash contributions you are required to have:
- Name of the organization
- Date and location of the contribution
- Description of the property donated
- Fair market value and method of determination
- Cost or other basis if donating appreciated property
If noncash contributions exceed $500 an additional Form (Form 8283) must be filed with your return.
If noncash contributions exceed $5,000 a written appraisal is required.
Conclusion
This article gives a very brief summary of how to deduct charitable contributions. There are many other rules pertaining to situations such as contributions of automobiles, contributions of appreciated property, donating required minimum distributions and charitable mileage deductions. If these situations apply to you I would encourage you to contact a tax professional.