How to Claim Charitable Donations on Your Taxes
The IRS defines a charitable contribution as “a donation or gift to, or for the use of, a qualified organization.” You must abide by certain rules to claim charitable donations on your taxes legitimately.
Charitable Giving Under the New Tax Law
Prior to the new tax law, about one in three people itemized deductions — often including charitable donations — on their annual tax return. But with the standard deduction nearly doubling for the 2018 tax year, individuals would need $12,000 and married couples would need $24,000 in deductions to make itemizing worthwhile. Some fear this could eliminate the tax reasons for giving to charity.
One way to continue charitable giving and get the tax benefit is called “bunching.” The idea is to bundle or bunch donations from multiple years into a single year to meet the increased threshold for itemizing deductions. The next year (or two) the taxpayer would take the standard deduction. There are different approaches to bunching, including completely skipping charitable donations on “off” giving years or establishing a donor-advised fund, which is a tax-free account at a public charity that enables donors to immediately claim the tax deduction while establishing a fund from which they can give charitable grants when it works for them.
What is a Charitable Contribution?
Donations include cash contributions and property such as clothing, household items, vehicles and even land. However, you may only deduct the fair market value (FMV) of the property you donate.
How Do I Determine Fair Market Value (FMV)?
Fair market value applies to donations of stock or other noncash property such as clothes, household items, land and cars. FMV boils down to the price the item would sell for on the open market.
Numerous factors go into calculating FMV, including the item’s cost or selling price, sales of comparable items, replacement cost and expert opinions. For full details of fair market value, consult IRS
Publication 561, Determining the Value of Donated Property.
Which Expenses Qualify as Charitable Tax Deductions?
You can claim a tax deduction for expenses you incur:
- To cover a live-in student who is sponsored by a qualified organization.
- Out of pocket while serving as a volunteer for a qualified organization.
For more examples of what counts as a deductible charitable contribution, consult
IRS Publication 526.
Which Organizations Qualify to Receive Charitable Contributions?
The government considers the following types of organizations qualified to receive tax-deductible donations:
- Charitable (such as American Red Cross, Boys and Girls Club of America, Goodwill, Salvation Army and United Way)
- Educational (such as nonprofit schools)
- Religious (such as churches, mosques, synagogues and temples)
- Those working to prevent cruelty to children or animals
- Federal, state and local governments (for contributions intended for public purposes)
Which Charitable Contributions Are Not Tax Deductible?
As a general rule,
donations to individuals, political organizations and candidates for public office are not tax deductible. The same goes for gifts of money or property given to:
- Groups run for personal profit
- Groups that lobby for changes to the law
- Homeowners associations
- Civic leagues
- Social clubs
- Sports clubs
- Labor unions
- Chambers of commerce
- Civic leagues
Tuition, the cost of tickets for a raffle, bingo or lottery and dues/fees to country clubs, fraternal orders, lodges and the like are not tax deductible. Additionally, you may not claim the value of your time or services as a tax-deductible charitable contribution. For example, blood donations to Red Cross are not tax deductible.
How Can I Be Sure I’m Donating to a Tax-Exempt Organization?
The easiest way to confirm that you are donating to a tax-exempt organization is to ask the organization directly for proof of their tax-exempt status. You also can search for charities using the
Exempt Organizations Select Check tool or confirm tax-exempt status by calling the IRS at (877) 829-5500.
Records to Keep and Forms to File to Claim a Charitable Donations on Your Tax Return
The records you must keep and documents you must file with your tax return vary depending on whether you donated cash or property and the value of noncash contributions.
If you donate by check, cash or some other monetary gift, you must provide written communication such as a bank record, payroll deduction records or written acknowledgement from the tax-exempt organization with your tax return. This written proof must include:
- The name of the organization.
- The date you made the contribution.
- The amount of your contribution.
Cash or Property Donations of $250 and More
To claim charitable donations of cash or property equal to $250 or more, you must provide a “contemporaneous written acknowledgement” from the qualified organization. This one document, provided by the qualified organization, can satisfy both the written communication and contemporaneous written acknowledgement requirements. It must include:
- The amount of cash and a description of your donated property.
- Whether the organization gave you any goods or services for your gift, along with a description and a good faith estimate of their value.
Deductions for Noncash Contributions Greater than $500
If your deduction exceeds $500 for a noncash donation, you must attach a completed
Form 8283 (Noncash Charitable Contributions) to your tax return.
Noncash Property Worth Less than $5,000
If the noncash property you donated is worth less than $5,000, you must complete Section A of
Form 8283 and attach it to your tax return.
Noncash Property Worth More than $5,000
If the worth of your donated noncash property exceeds $5,000, you must obtain a qualified appraisal and complete Section B of
Form 8283, then attach both to your tax return.
Keep pace with the latest on charitable contributions with
IRS Publication 526. The government updates this resource regularly and also offers most publications by phone request at (800) TAX-FORM.
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