By Debbie DiVito, CPA, Content Manager, Women & Co.
I have a fantastic group of friends. They're all super involved in their communities and the only thing they like better than raising money for a worthy cause is having a party to raise money for a worthy cause. But with all the donating we do throughout the year -- whether we're supporting a friend who's running in a marathon to raise money for a local charity or attending a nationally-recognized organization's latest fundraising fete -- how do we know what's deductible, how much of it can we write off of our taxes, and what records do we need to support it?
Since the Internal Revenue Service (IRS) has numerous rules on the topic of charitable deductions, we consulted H&R Block® for answers to our most pressing questions. Here's what we learned:
Which Organizations Qualify?
So which groups qualify as "charitable organizations" according to the IRS? First and foremost, the organization must be an IRS-approved organization to get the deduction. Generally, these groups are referred to as 501(c)(3) organizations and organized into the following categories:
•Nonprofit religious groups
•Nonprofit educational groups
•Nonprofit charitable groups
If you're not sure if the organization you're donating to is IRS-approved, find out its tax ID number, and then head to the IRS website to search for the organization on Exempt Organizations Select Check. If the organization is listed, you're in luck.
What's Deductible?
Money Donations. These include the donations you make using cash, check, credit card, debit card, payroll deduction, and automatic withdrawals from your bank account. Keep in mind that if you get something of monetary value in return for your gift -- like a fancy dinner or an open wine bar -- you can't write-off the full amount. There are some exceptions to the rule, however. Learn more about that in IRS Publication 1771: Charitable Organizations, Substantiation and Disclosure Requirements.
Noncash Donations. Property donations are usually used clothing and household goods. To be deductible these items must be in good used condition or better. Your write-off for these types of donations is generally the fair market value of the property at the time you give it. Need help determining what it's worth? Read the
IRS rules on the matter in IRS Publication 561: Determining the Value of Donated Property. You can also visit the Salvation Army online for a listing of values for many household and clothing items.
When Do You Need a Receipt?
Money Donations. If you and your friends are anything like me and mine, several times throughout the year we find ourselves spontaneously giving small cash gifts to different organizations. Whether you're throwing a $20 check into the collection plate at church or dropping a few dollars into the Salvation Army bucket at Christmas time, it all adds up. But if you're planning on deducting a cash donation, regardless of the amount, you must prove the donations with bank records, such as:
•Bank or credit union statements
•Canceled checks
•Credit card statements
If you're donating $250 or more, you'll also need written acknowledgement of your donation from the organization. Read more about what the receipt should say in H&R Block's Tax Tip 16, Information on Tax-Deductible Contributions.
Noncash Donations. Do you take a trip to Goodwill every time you clean your closet? Any time you make a noncash donation, regardless of the amount, you should get a receipt. But what about the unattended drop-off sites? If it's impossible or impractical to get a receipt for your noncash donation (and your total donations for the year are valued at less than $250), keeping your own reliable written record for each item donated will suffice. The IRS recommends taking a picture of each item along with a written log to substantiate these types of donations.
For any noncash donation you make of $250 or more, however, you'll need a receipt. Making a donation valued at $500 or more? The rules get even stricter. Learn the IRS recordkeeping requirements for noncash donations of $500 or more on the H&R Block website. You can find their easy-to-understand translation of the rules in H&R Block's Tax Tip 16, Information on Tax-Deductible Contributions.
Remember that every situation is unique. If you've made a charitable contribution and want to learn more about the tax implications, consult the IRS website. You can also learn more on H&R Block's website.
About the Author:
As Women & Co.'s Content Manager, Debbie is responsible for creating original editorial content for Women & Co. In her role, Debbie couples more than seven years' experience supporting clients in the financial services industry with her passion for writing about important financial concepts in a way that is both unintimidating and fun. Debbie is a Certified Public Accountant, has undergraduate degrees in Finance, Multinational Business Operations, and Spanish from The Florida State University, and holds a Masters degree in Accounting from The University of Virginia.