A.M.E'Z PROFESSIONAL TAX SERVICES
TAKING THE PAPERWORK OFF YOUR HANDS
There are many benefits to giving in charity, but did you know you are eligible to claim a tax deduction for contributions you gave to certain qualified organizations, whether they were given in the form of money or property. To claim these deductions, file Form 1040 (U.S. Individual Income Tax Return) and itemize the deductions on Schedule A, Itemized Deductions.
What Qualifies as a Charitable Contribution?
A “charitable contribution” is a donation or gift to a qualified organization without any expectation of receiving any value or service in return.
These can be in the form of money/property given to qualified organizations, but they also include any out-of-pocket expenses accrued while volunteering for a qualified organization, as well as certain expenses you’ve paid for an exchange student who lived with you (as long as they’re sponsored by a qualified organization).
However, these types of charitable contributions can not be claimed as deductions:
Money/property given directly to an individual
Dues or fees paid for membership in country clubs, lodges, fraternal orders, or similar organizations.
The unquantifiable value of your time or services given to charitable organizations.
Raffle, bingo, or lottery tickets
The unquantifiable value of blood/serum given to a blood bank, or other such organization.
Local fundraisers for community members in need of assistance (unless they have registered as a charitable organization with the IRS)
In order to claim qualified charitable contribution deductions, you must make the contributions to a qualified organization. Aside from church, most organizations must apply to the IRS to be registered as a qualified charitable organization.
Churches, synagogues, temples, mosques, and other religious organizations are all considered charitable organizations, so your contributions to them are automatically deductible.
Aside from these religious organizations, these other types are also qualified charitable organizations:
Most nonprofit organizations, like The Salvation Army, Red Cross, CARE, Goodwill Industries, United Way, Boys and Girls Clubs of America.
Nonprofit hospitals and medical research organizations
Most nonprofit, educational organizations such as Future Business Leaders of America, 4-H Club, and Junior Achievement
Nonprofit volunteer fire departments
Public parks and recreation facilities
War veterans’ groups such as Disabled American Veterans and Purple Heart
Federal, state, and local governments if your contribution is solely for public purposes, such as a gift to reduce the public debt
However, not all organizations qualify by the IRS’s tax-deductible charitable organizations contribution.
The following do not qualify for charitable contribution deductions:
Political groups/candidates for public office or organizations who work to lobby for law changes
Chambers of commerce
Organizations run for individual profit
Civic leagues, social clubs or sports clubs
Foreign organizations (except some Israeli, Canadian, and Mexican charities)
If you’re not sure whether the organization you contributed to is tax-exempt, use the IRS official search tool here.
Date of Contribution
Typically, you’re only eligible to claim contributions in the year you made them. A mailed check is considered “delivered” on the date you mailed it, regardless of when it actually arrived at its destination; a charitable contribution you charged to your credit card is only deductible in the year you made the charge. However, sometimes because of adjusted gross income limits, contributions you’ve made cannot be deducted in the year you made them. In such cases, they may be carried over and claimed in future years.
Keep Careful Records of Contributions
It’s extremely important to keep careful records (and receipts) of all charitable contributions, regardless of the amount. However, if any one contribution exceeds $250, you must provide written documentation from the qualified organization proving the contribution. Likewise, if you’ve donated any property with a fair market value exceeding $500, you must include a written description of the donated property in your tax return.
For single contributions of less than $250, you should provide evidence, such as a canceled check, a receipt from the organization, or other written documentation of the charitable contribution.
If you made cash contributions, you must provide either a bank record or a receipt from the qualified organization to prove the contribution was made.
Item (Non-cash) Donations
Not all charitable contributions involve money. Did you donate your used clothing, furniture, or your kids toys and games to an organization like Goodwill or the Salvation Army during the course of the year? As long as the donated items are in good condition, you can claim deductions equal to the fair market value of your donated items.
To figure out the fair market value, you should survey local thrift and consignment stores for similar items. This is something the IRS expects of you, as the taxpayer, but they do provide a handy PDF with more information on determining the value of your donated property.
If you’ve donated property, you must provide a receipt which includes:
The name of the qualified charitable organization
Date and location of the contribution
A description of the property
You should also provide written documentation that includes the organization’s address, the fair market value of the property (valued at the time of the contribution) and an explanation of how the fair market value was determined.
If you donated more than $500 worth of property as a charitable contribution, you must fill out a Form 8283 (Non-cash Charitable Contributions) and include it with your tax return.
In the event that you donated property with a fair market value exceeding $5,000, you must have the property appraised by a qualified appraiser and include the written appraisal with your tax return.
If you donated a qualified vehicle (motor vehicle, boat, or aircraft) which was worth more than $500, you will not be eligible to claim a charitable deduction unless the charitable organization provided you with a written acknowledgement of the contribution (usually within 30 days of the donation). You’ll have to provide the IRS with this written acknowledgment along with your tax return.
If the organization keeps the donated vehicle for use serving the organization, you must provide written documentation including the following information:
A certification stating the organization’s intended use of the donated vehicle, for how long they intend to use it, and whether improvements will be made to the donated vehicle.
A certification stating that the donated vehicle will not be exchanged/sold before the intended end of use date, or before the planned improvements to the donated vehicle have been made.
If the organization used the vehicle for charitable purposes and then sold it, you should be eligible to claim a deduction equal to the fair market value of the vehicle when you donated it. The qualified charitable organization who received the donation should provide you with a Form 1098-C.
In the event that the charitable organization sells your donated vehicle without having used it for charitable purposes, your deduction typically cannot exceed the amount that the charitable organization received from their sale of the vehicle. To prove this contribution, you will need:
Proof that the vehicle was sold by the organization in an “arm’s-length” transaction between two unrelated parties
Proof of the gross amount received by the charity from the sale of the donated vehicle
A statement asserting that the original claimed deductible amount for the donated vehicle will not exceed these gross proceeds
For more information, check the IRS’ guide to charitable vehicle donation here.
Support of Exchange Students
If you host an American or foreign exchange in your home, you may be eligible to deduct up to $50 per month they lived with you in the year. This would be counted as a charitable deduction on Schedule A. In order to claim this deduction, you must provide the IRS with a written agreement from the qualified organization that administered the student program. However, if you have been reimbursed for any of these expenses, you cannot claim those as charitable contributions on your tax return.
It’s important to note that the exchange student cannot be your dependent or a relative, and must be a full-time student at the high school level or below. In the case that your child is involved in a mutual exchange program with a foreign student you’re hosting in your home, you are not allowed to claim deductions for those expenses.
Qualified expenses include the cost of those things you purchased for the well-being of the student, including:
Medical and dental care
You cannot claim deductions for normal household expenses like your rent, mortgage payments, taxes, home insurance, or repairs.
If you used your time and energy to help a qualified organization as volunteer, you can deduct your out-of-pocket expenses incurred while serving the organization. Qualified expenses include the cost of any special, required volunteer uniforms which are not suitable for everyday use, travel expenses (as long as the trip was not for pleasure but service to the organization). These can include the cost of gas and oil, or 14 cents per mile.
The unquantifiable value of your time or services cannot be claimed as tax deductions, however.
Partially Deductible Contributions
Sometimes, you can only claim deductions for part of the charitable contribution you made, such as when you attend special events for a qualified organization. In those cases, you can only claim deductions for the amount of money you paid which exceeded the normal amount for that event.
If you attended a dinner fundraiser for a qualified non-profit organization, for example, and paid $65 per ticket and the regular price of the same meal is $20, your eligible contribution amount would be $45 (as you paid $45 more for that meal than it would typically cost, as a charitable contribution to the organization).
Likewise, if any part of your contribution is reimbursed to you in the form of goods or services, you are only permitted to claim a deduction in the amount that exceeds that which you’ve been reimbursed for.
For example, if you spent $30 on a school’s fundraising bake sale and it would have normally only cost you $10 to purchase the baked goods from the store, then you would be able to claim a $20 deduction.
If the payment you received for your contribution exceeds $75, you must provide the IRS with a written statement from the organization that states the value of the goods or services you received.
Direct Contributions from an IRA
Taxpayers who are 70 and a half (or older) and make a direct transfer of up to $100,000 from their IRA to any qualified charitable organization have made a Qualified Charitable Distributions (QCD). These are considered part (or all) of a taxpayer’s minimum required distributions (MRD) for the year.
QCDs are not taxable and you cannot claim these direct transfers as charitable deductions on your tax return. However, any other distributions that are not QCDs are subject to the regular rules of IRA distributions.