For most taxpayers, a tax deduction is not the primary reason for their charitable donations. However, if you itemize deductions, you should be
aware of the rules so you can take advantage of this tax benefit!
In order for a donation to be tax deductible, it must be made to a qualified organization such as a church or a non-profit. Most organizations (other
than churches and governments) must apply to the IRS to become qualified. Therefore, if you are ever unsure of whether an organization is qualified,
you can either inquire with them or go to IRS.gov to find out. From IRS.gov, click "Tools" and then "Exempt Organizations Select
Check." You can also contact the IRS via phone to learn more. You can never deduct donations you make to an individual.
Next, you must have proper documentation in order to claim a deduction. The type of documentation required will depend on the type of donation made:
- This includes donations paid by cash, check, debit or credit card, payroll deduction, or electronic funds
transfer. A written acknowledgement or receipt from the organization is required if the donation is $250 or more. For lesser amounts, you must
retain one of the following:
- Credit card statements (must show name of organization, date of contribution, and amount donated)
- Cancelled checks
- Receipts from the organization
- Payroll deduction records
- Documentation requirements for non-cash contributions vary depending on the value of the item. Generally,
you must keep written records of the contribution that detail the name and address of the qualified organization, the date and location of the
donation, the value and a description of the property donated, and the amount you paid for the item(s). In most cases, you must also have a
written receipt from the organization. If the donation is valued at less than $250, the IRS does waive the receipt requirement "if it is
impractical to get one." An example would be items donated at a Goodwill drop box. If the contribution is valued at more than $500,*
additional requirements must be met.
– If you provide services to a qualified organization, your unreimbursed out-of-pocket expenses related to
those services may be deductible. Examples of such expenses include supplies purchased, mileage, air fare, etc. To claim these expenses, you must
have adequate records such as receipts or a mileage log. Additionally, if you want to claim expenses over $250, you must have written acknowledgment
from the qualified organization.
Lastly, it is important to remember that you cannot deduct a donation if you receive a benefit in return. For example, if a charity is selling fish
dinners for $10, the $10 is not deductible unless you decline to take the plate. For more information on charitable giving, refer to IRS Publication
526, Charitable Donations.
*Non-cash contributions of more than $500 are out of the scope of SECU’s tax preparation programs.
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