David E. Tepper, CPA, PLLC highly encourages charitable giving to your church, or to any other charitable cause you support. The intangible benefits and satisfaction you gain from giving often far outweighs the value of the amount you have given.
Although the act of giving is itself rewarding, an added benefit of giving charitable contributions to qualified organizations is that it may help lower your tax bill.
If your goal is to obtain tax deduction for your contribution, then you must be giving to a qualified organization. You cannot deduct contributions made to specific individuals, political organizations and candidates; only to a qualified organization that has been granted tax exempt status by the IRS.
Here is a useful IRS link you can use to check if a particular organization you intend to give to has tax exempt status:
You can only deduct charitable contributions if you choose to itemize your deductions on 1040 Schedule A. If you choose to take the standard deduction, you will not be able to deduct charitable contributions.
Substantiation and Disclosure Requirements
The IRS imposes recordkeeping and substantiation rules on donors of charitable contributions and disclosure rules on charities that receive certain quid pro quo contributions.
A donor must have a bank record (such as a cancelled check) or written communication from a charity (such as a receipt or letter showing the name of the charity, the date of the contribution, and the amount of the contribution) for any monetary contribution before the donor can claim a charitable contribution on his/her federal income tax return.
A donor is responsible for obtaining a written acknowledgment from a charity for any single contribution of $250 or more before the donor can claim a charitable contribution on his/her federal income tax return. An organization that does not acknowledge a contribution incurs no penalty; but, without a contemporaneous written acknowledgment, the donor cannot claim the tax deduction. Although it is a donor’s responsibility to obtain a written acknowledgment, an organization can assist a donor by providing a timely, written statement containing the following information:
- name of organization
- amount of cash contribution
- description (but not the value) of non-cash contribution
- statement that no goods or services were provided by the organization in return for the contribution, if that was the case
- description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution
- statement that goods or services, if any, that an organization provided in return for the contribution consisted entirely of intangible religious benefits
For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.
A separate acknowledgment may be provided for each single contribution of $250 or more, or one acknowledgment, such as an annual summary, may be used to substantiate several single contributions of $250 or more. Separate contributions of less than $250 will not be aggregated. An example of this could be weekly offerings to a donor’s church of less than $250 even though the donor’s annual total contributions are $250 or more.
Goods and Services
A charitable organization is required to provide a written disclosure to a donor who receives goods or services in exchange for a single payment in excess of $75.
The acknowledgment must describe goods or services an organization provides in exchange for a contribution of $250 or more. It must also provide a good faith estimate of the value of such goods or services because a donor must generally reduce the amount of the contribution deduction by the fair market value of the goods and services provided by the organization. Goods or services include cash, property, services, benefits or privileges.
Non Cash Donations:
Donations of stock or other non-cash property such as furniture or household goods are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.
Special rules apply to vehicle donations. You can find out more about these rules in IRS Publication 4303.
If a donor makes a single contribution of $250 or more in the form of unreimbursed expenses, such as out-of-pocket transportation expenses incurred in order to perform donated services (i.e. charitable mileage is deductible at 14₵/mile) for an organization, then the donor must obtain a written acknowledgment from the organization
- a description of the services provided by the donor
- a statement of whether or not the organization provided goods or services in return for the contribution
- a description and good faith estimate of the value of goods or services, if any, that the organization provided in return for the contribution
- a statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible religious benefits (described earlier in this publication), if that was the case In addition, a donor must maintain adequate records of the unreimbursed expenses.
See IRS Publication 526,or a more detailed discussion on Charitable Contributions
If you have any questions about charitable donations, feel free to contact me either by email or phone.