At BHT&D CPAs, we get many questions regarding charitable donations throughout the year. Here are a few things to consider as you make your donations:
1. The donation must be to a qualified organization. Qualified organizations include nonprofit groups that are charitable, religious, educational, scientific, or literary in purpose. Donations to specific individuals, political organizations or political candidates do not qualify. You can go to IRS.gov, select “Tools” and then select “Exempt Organizations Select Check” to see if an organization qualifies.
2. If you receive a benefit in return, you can only deduct the difference between the donation amount and the fair market value of the benefit. For example, if you donate $200 but receive a gift basket in return worth $75, you are only able to deduct $125.
3. For non-cash donations of clothing or household goods, the items must be in good used condition or better to be deductible. If you would like a good guide to assist in your valuation, download our Charitable Donations Value Worksheet.
4. To deduct a cash or check contribution, you must have proof of donation with one of the following:
- a bank statement or canceled check
- payroll deduction records, or
- a written communication from the organization containing the name of the organization, the date of the gift, and the amount donated.
5. To deduct contributions of cash or property of $250 or more, you must also have a written communication from the organization containing the name of the organization, the date of the gift, and the amount donated, and a description of any property contributed. It must also state whether the organization provided any goods or services in exchange for the gift.
A FEW MORE NOTES TO REMEMBER REGARDING CHARITABLE DEDUCTIONS:
- If you do not itemize your deductions, the charitable donation will not save you additional tax.
- You are unable to deduct the value of your time or services or the value of income lost while you work as an unpaid volunteer for a qualified organization.
- If you donate a vehicle, boat or airplane, you must attach Form 1098-C to your return supporting the contribution. This form needs to be provided by the qualified organization.
- Costs of raffles, bingo, and lottery are not charitable deductions.
- The deduction for charitable contributions generally cannot be more than 50% of your adjusted gross income (AGI).
- You cannot gift a partial interest in your property. For example, if you donate the right to use your vacation home for one week for a church auction, you are unable to claim a deduction due to the partial interest rule.
Do you need to determine the value of your charitable donations? Use our Charitable Donations Value Worksheet.
If you would like to discuss your gift giving, please give us a call to discuss your options. You can request a complimentary accounting consultation or contact us at (616) 642-9467.