Tax Deduction for Charity Donations

Contributions to churches and non-profits are tax-deductible

Young girls placing cans in donations box.
© Jamie Grill / Iconica / Getty Images

Donations to charity are tax deductible expenses. These donations can reduce your taxable income and lower your tax bill. Not everyone will be able to deduct their charitable contributions, however. You will need to itemize your tax deductions in order to claim any charity.

"You may deduct charitable contributions of money or property made to qualified organizations if you itemize your deductions." (IRS Publication 78)

Where to Claim the Charity Deduction

You claim your tax deduction on Form 1040, Schedule A (PDF)

Rules for Claiming the Charitable Contribution Deduction

Your gift of cash or property must meet certain criteria in order to be tax-deductible.

  • You must actually donate cash or property. A pledge or promise to donate is not deductible until you actually pay.
  • You must contribute to a qualified tax-exempt organization. Charities will let you know if they have received their 501(c)(3) tax-exempt status. Some organizations are not required to obtain 501(c)(3) status from the IRS. These include churches and other religious organizations.
  • You must be able to itemize. Giving to charity is a great tax planning strategy, but it only works for people who are eligible to itemize their deductions.
  • You must meet record keeping requirements. This includes saving canceled checks, acknowledgment letters from the charity, and appraisals for donated property.

    Keeping Records of Your Charity

    Taxpayers are required to keep excellent records of their charitable contributions. Under the Pension Protection Act, you must keep written records of all cash donations. Your records must indicate the name of the charitable organization, the date of your contribution, and the amount your contribution.

    Canceled checks work well as a written record, since the name of the charity, the date of the gift, and the amount of the gift will all be recorded on the check. Bank statements showing a gift paid by debit card and credit card statements showing a gift paid by credit card are also contain these same elements needed for your records.

    Charitable organizations will often provide donors with a written letter acknowledging the gift or with a receipt for the donation. These acknowledgment letters should also be kept with your tax records. If a tax return is audited, the IRS can disallow charitable donations of $250 or more if you don't have the written acknowledgement from the charity that documents your gift. The IRS advises, "If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that lists each contribution and the date of each contribution and shows your total contributions" (from Publication 526).

    Non-Cash Contributions of Property

    Contributions of property (other than cash) are subject to strict record keeping and substantiation rules.

    You must be able to substantiate the fair market value of the goods or property you donated, plus keep any written acknowledgments you receive from the charity.

    If you donate more than $500 worth of Non-Cash Contributions, fill out Form 8283 and include this with your tax return.

    If you contribute a car, truck, boat, airplane, or other vehicle, and the vehicle is worth more than $500, you must receive a written acknowledgement from the non-profit before you can claim a tax deduction.

    Tips for Donating Non-Cash Items

    • Make a list of the items you're giving away. You'll need this detail for the Form 8283.
    • Note the condition of each item. The IRS will allow a deduction for any item that's in good condition or better.
    • Arrive at a value for each item. For common items such as clothing, small appliances and other household goods, you can use the valuation guides from the Salvation Army or Goodwill. If the item you're donating is brand new, keep the price tag or store receipt to prove the item's value.
    • The donation works for food and groceries too. If you donate groceries to a charity, you can deduct the cost of the donated items. Just be sure to get a written acknowledge for your donation, and keep your grocery receipt to prove the price of items you donated.
    • Consider taking a picture of your donations. In the rare event you are audited, the IRS may distrust your written documentation. Having a picture handy of what you donated may be useful, especially if you are donating lots of items.
    • Obtain a written receipt for your donation. This proves that a donation was actually made. But you'll also need to fill out the receipt when dropping off your items to list what you're donating and the value of the donation, so having this ready ahead of time will be handy.
    • If you're donating property worth more than $5,000, obtain a written appraisal to value the property before donating it.

    Limits on the Charitable Contribution Deduction

    Your charitable contribution tax deduction may be limited. There are limits specific to charitable contributions, and there are general limits on itemized deductions.

    50%, 30%, and 20% Limits on Charitable Contributions

    • Generally, you can deduct cash contributions in full up to 50% of your adjusted gross income.
    • Generally, you can deduct property contributions in full up to 30% of your adjusted gross income.
    • Generally, you can deduct contributions of appreciated capital gains assets in full up to 20% of your adjusted gross income.

    Charitable contributions in excess of these limits can be carried over to the following tax year. The excess contributions can be carried over for a maximum of five years.

    Not Tax Deductible

    Contributions are not tax deductible if given to any of the following:

    • Political parties, political campaigns, or political action committees.
    • Contributions given to individual people.
    • Fees or dues paid to professional associations.
    • Contributions to labor unions, chambers of commerce, or business associations.
    • Contributions to for-profit schools and hospitals.
    • Contributions to foreign governments.
    • Fines or penalties paid to local or state governments.
    • The value of your time for services rendered to a non-profit.

    IRS Resources:

    Tax Law Resources About Charitable Donations:

    You should keep all documents regarding donations to charity. This includes both cash and non-cash contributions. Under the Pension Protection Act, taxpayers are required have receipts from the charity, a canceled check, or credit card statement to prove their donation. No tax deduction will be allowed if the taxpayer cannot provide any supporting documentation. You will not need to mail in the receipts with their tax return.

    Instead, keep receipts and other documentation with your copy of the tax return in the event of an IRS audit.

     

    What Records You Need to Keep

    For cash contributions under $250, be sure to keep the following records:

    • Canceled check, bank statement, or credit card statement showing the amount paid, date paid, and the name of the charity to which you gave money;
    • Written receipts or acknowledgment letters from the charity showing the date and the amount of your contribution; and
    • Any other documentation or records that would establish the date and the amount you contributed.

    For cash contributions of $250 or more, you must have a written acknowledgment from the charity before you can deduct the contribution on your tax return. Be sure to keep all acknowledgment letters from charities with your tax records. Acknowledgment letters must state the following:

    • Amount of cash you donated,
    • Whether the charity provided any goods or services in exchange for your donation, and
    • Description and good faith estimate of the value of goods or services that the charity provided to you.

    Keeping Records of Non-Cash Contributions

    For donations of property, you must keep records to establish what you donated, its condition, its fair market value, and the amount of your tax deduction. Your records must indicate:

    • Name and address of the charity,
    • Date and location of the contribution,
    • Description of the property donated,
    • Fair market value of the property and how you figured the value, and
    • Amount claimed as a tax deduction.

    For non-cash contributions worth $250 to $500, you will also need a written acknowledgment letter from the charity to substantiate your deduction.

    For non-cash contributions worth $500 to $5,000, you will need to keep records that establish:

    • How you acquired the property (such as purchase or inheritance)
    • Date you acquired the property
    • Your cost or adjusted basis in the property

    For non-cash contributions of $5,000 or more, you will need a written appraisal from a qualified appraiser to substantiate the value of your deduction.

    Donated items, such as cars, clothing, and household goods, must be in good condition. "The new law does not define 'good condition,'" according to a tax law briefing from CCH. No tax deduction is allowed for items in less than good condition. You should keep a detailed list of the non-cash goods you donated to charity, along with a description of their condition.

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