Charitable Contributions - What You Should Know

Charitable Donations

The Internal Revenue Service has a number of rules relating to obtaining a deduction for charitable donations.  

Qualified Charities  

To obtain a deduction for a donation of any type, you must donate to a qualified charity. To be a qualified charitable organization that organization must be approved by the IRS. To determine the status of a charity, you may go to IRS.gov and select the IRS Select Check tool. Gifts to individuals, political organizations, or candidates are not deductible, no matter how well intentioned you might have been. 

Examples such as donations to school employees for “Employee Appreciation Day” are not deductible. Why? Because as admirable as the intention this is not an IRS approved organized charitable organization. 

Itemize Deductions  

To obtain a deduction for any donations, you must itemize deductions, although, for 2020 and thereafter, the IRS is now allowing an above the line (AGI) deduction up to $300.00. 

Benefit in Return

Should you obtain goods or services in
return for the donation you make, you are required to reduce the amount of the
deduction for the fair value of the services or goods received you can only
deduct the amount of your gift that is more than the value of what you got in
return.  

Examples of benefits include merchandise, meals, tickets to an event or other goods and services.  

Types of Donation

If you donate property instead of cash your deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price you would have received if you sold the property on the open market. If your donation is used clothing, or household goods, those items must be in good condition or better, to be deductible.  

Special rules apply to cars, boats, and other types of property donations. If what you donated amounts to $5,000 or more, you must obtain an independent appraisal of the donated property before you can take the deduction. 

Donations of $250 or More For any donation made in the cumulative amount is $250 or more for the entire year, you must have a written statement from the charitable organization the donation was made to during the year.  

That statement must show the amount of the donation and a description of any property given. It must also say whether you received any goods or services in exchange for the gift. Additionally, the statement must also provide a description and an estimate of the value of any
goods or services received. This written acknowledgment must be obtained by the time you file your tax return or by the due date, including extensions, of the tax return for the year in which you made the donation. Failure to obtain this written acknowledgment may result in the disallowance of your deduction for the donation. 

It's important to keep accurate records and documentation of all charitable donations made. throughout the year to ensure compliance with IRS rules and to claim any available deductions.