One great privilege we are reminded of during the Thanksgiving and Christmas season is the opportunity we have to give to good causes. But you may be wondering if there are any tax benefits that come along with these donations, and, if so, what do you need to know? Hopefully, this post will help guide you through the process of what you may take as a tax write-off and what you will need to keep for your records should you ever need to verify the contributions you have taken. While all we will need to give us as your tax preparer is a contribution summary with the necessary information (as opposed to original receipts), you will need to hold onto your original receipts in case the IRS ever comes to you with any questions. And we have seen that the IRS is beginning to scrutinize these transactions a bit more closely.
A quick note: for our purposes, cash contributions will mean cash, check, credit card, etc. Non-cash contributions will mean all other items and other property given.
- If a contribution is less than $250, you will need a bank record, receipt from the organization, or payroll deduction record showing the organization’s name, date and amount of contribution.
- If a contribution is $250 or more, you will need written acknowledgment from the charitable organization or a payroll deduction record. The acknowledgment must show the date and amount donated, state whether any goods or services (other than intangible religious benefits) were provided by the organization and include a good faith estimate of the value, and state that the only benefit received was intangible religious benefits, if that was the case. This is becoming a point of emphasis for the IRS regarding cash contributions.
- Combine claimed deductions of all similar items to determine if the amount of the donated items is greater than $500
- For contributions less than $250, you will need a receipt, if practical, from the organization; and a record of the organization’s name, date of contribution and reasonably detailed description of the contributed property
- For contributions from $250 to $500, you will need a written acknowledgment from the organization (practical or impractical). The acknowledgment must show the date and location of the contribution, a reasonable detailed description of the contributed property, state whether any goods or services (other than intangible religious benefits) were provided by the organization and include a good faith estimate of the value, and state that the only benefit received was intangible religious benefits, if that was the case. The acknowledgment does not need to show value of goods, as this is ultimately the taxpayer’s responsibility to determine. Again, this written acknowledgment, including the proper wording, is becoming a point of emphasis for the IRS.
- For contributions more than $500 but not more than $5,000, All prior requirements apply and you must include how the property was acquired, approximate date acquired, original cost/basis of property.
- For contributions over $5,000, you must attach a written appraisal to your return.
For all non-cash donations, it is up to you, the taxpayer to determine the value of what you gave. We cannot determine this for you, but we have a good valuation guide for you at this link: Charitable Non-Cash Valuation Guide
In addition to these types of giving, you may also deduct certain expenses related to volunteer work, such as miles driven (keep an accurate log with date, purpose and miles). You may deduct the value of your time, however.
Most of the organizations you may think of would be qualified charitable organizations that you can take a deduction for donations. A few that come up in confusion that are not qualified include political organizations, country clubs and other social groups (unless specifically noted as a qualified charity), homeowner’s associations, and individuals.
Please let us know if you have any questions regarding charitable contributions or any tax questions!
-Heritage Accounting and Tax Services