This article is accurate for returns filed through tax year 2017. Under the Tax Cuts and Jobs Act, some of the laws mentioned changed beginning in 2018. Learn more about the updated tax laws enacted under the Tax Cuts and Jobs Act here.
Did you make a cash contribution to your favorite charity? Have you recently spent a weekend cleaning stuff out of your garage or basement that you then donated to a local charity? Supporting your charitable causes can be tax deductible, but you must meet certain conditions. Qualifying charitable contributions can be made in cash, property (such as clothing, furniture, household items, or vehicles), or out-of-pocket expenses (such as mileage) you paid to do volunteer work for a qualifying organization. The IRS released tips for taxpayers about the deductibility of donations, and we have summarized the points below:
How Do I Know If An Organization Qualifies As A Charitable Organization?
In order for your contribution to be considered tax-deductible, the organization you are donating to must be a qualified charitable organization. To find out if your charity is a qualified organization is to ask the charity about their tax exempt status.
Itemizing Charitable Contributions
Your charitable contributions are only deductible if you itemize the deductions using Form 1040, Schedule A.
Fair Market Value
Fair Market Value is the price that a given property or asset would fetch in the marketplace if you were to sell that item. Generally, cash contributions and the fair market value of most property donated to a qualified charitable organization can be used as a deduction. Special rules apply to several types of donated property, including cars, boats, clothing and household items. If you receive something in return for your donation, such as merchandise, services or admission to a charity banquet, you may only deduct the amount that exceeds the fair market value of the benefit you received.
What Records Do I Need To Keep For A Charitable Donation?
You need to keep good records of any donations you make, even donations of small amounts. All cash contributions must be documented to be deductible. A canceled check, bank or credit card statement, payroll deduction records or a written statement from the charity that includes the charity’s name, contribution date and amount usually fulfill the record-keeping requirement for contributions.
Donations Over $250
All contributions valued at $250 and above require additional documentation to be deductible. For these, you need to receive a written statement from the charity acknowledging your donation. The statement needs to specify the amount donated, whether it is cash or the fair market value of the property donated. It should also state whether the charity provided any goods/ services in exchange for your contribution. Do not combine separate donations. For example, if you gave your church $25 each week for a total of $1300, treat each $25 contribution as a separate gift.
If you donated non-cash items that are valued at $500 or more, you must complete Form 8283, Non-cash Charitable Contributions, and attach the form to your return. If you claim a contribution of non-cash property worth more than $5,000, you typically must attach a property appraisal to your return along with Form 8283.
If you pledge to donate to a charity, keep in mind, contributions are only deductible in the tax year you actually make the contribution. If you pledge to donate $700 in August, but only paid the charity $100 by December 31 of that same year, only the $100 qualifies as being tax deductible. Check or credit card donations made at the end of the year usually qualify as tax-deductible for that tax year, even though you may not pay the credit card bill or have your bank account debited until after Dec. 31.
What Items Are Not Tax Deductible Charitable Donations
You cannot deduct any of the following expenses or contributions you may have made during the tax year:
- Travel expenses (including meals and lodging) while away from home. You can only deduct these if there was no significant element of pleasure, recreation, or vacation in the travel.
- Political contributions.
- Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups.
- Cost of raffle, bingo, or lottery tickets. You may be able to deduct these as a “Miscellaneous Deduction”. For more information on that, you would need to reference IRS Publication 529.
- Cost of tuition. You may be able to deduct this as an Education Credit (located under the Credits Menu) or a Tuition and Fees Deduction (located under the Adjustments menu) if you received a 1098-T from the educational institution. For more information about this, please reference IRS Publication 970.
- Value of time or services.
- Value of blood given to a blood bank.
- Transfer of a future interest intangible personal property.
- Gifts to individuals and groups that are done for personal profit.
- Gifts to foreign organizations.
- Gifts to organizations engaged in certain political activities that are of direct financial interest to your trade or business.
- Gifts to groups whose purpose is to lobby for changes in the laws.
- Gifts to civic leagues, social and sports clubs, labor unions, and chambers of commerce.
- Value of benefits received in connection with a contribution to a charitable organization.