Individuals and businesses making contributions to charity should keep in mind several important tax law provisions that have taken effect in recent years. Some of these changes include the following:
Guidelines for Monetary Donations
To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, amount paid, and the transaction posting date.
Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.
Guidelines for Non-Cash Donations
To deduct any non-cash charitable donation, the items generally must be in good condition or better to be tax deductible. For all donations of property, including clothing and household items, you should obtain a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return. Non-cash donations of a similar type that total $5,000 or more will require a qualified appraisal to be attached to the return.
To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders:
- Contributions are deductible in the year made — donations charged to a credit card before the end of 2015 count for the 2015 year.
- Check that the organization is eligible — The IRS provides an online database, Exempt Organization Select Check, so you can verify if a charity is eligible to receive deductible contributions.
- Individuals — only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions.
- Vehicles — the deduction for a car, boat or airplane is usually limited to the gross proceeds the charity receives from its sale. This rule applies if the claimed value is more than $500. Form 1098-C or similar statement must be provided to the donor by the organization and attached to the donor’s tax return.
The most important thing to remember when making charitable contributions is to keep good records and receipts. IRS.gov has additional information on charitable giving including this online mini-course Can I Deduct My Charitable Contributions.
Your accountant can offer assistance in determining if your contribution is deductible, or in deciding what documentation you need to keep on hand to support your deduction.