Reminders for Year-end Charitable Giving

Donations jar

We receive many questions from clients about charitable giving, especially in December, when so many nonprofit groups send out appeals. Please contact us regarding your unique situation so we can best advise you.

The IRS offers these helpful reminders:

  • Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the year count for that year. This is true even if the credit card bill isn’t paid until the following year. Also, checks count for the current year as long as they are mailed in the current year and clear, shortly thereafter.
  • Verify that the organization is qualified. Only donations to qualified organizations are tax-deductible. Consult the IRS’s Exempt Organizations Select Check. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Exempt Organizations Select Check.
  • For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form 1040. A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction and the taxpayer is not subject to phase-outs based on income.
  • If your contribution entitles you to merchandise, goods or services including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.
  • For a contribution of cash, check, or other monetary gift (regardless of amount), you must maintain as a record of the contribution a bank record or a written communication from the qualified organization containing the name of the organization, the date of the contribution and the amount of the contribution. In addition to deducting your cash contributions; you generally can deduct the fair market value of any other property you donate to qualified organizations. See IRS Publication 561, Determining the Value of Donated Property. For any contribution of $250 or more (including contributions of cash or property), you must obtain and keep in your records a contemporaneous written acknowledgement from the qualified organization indicating the amount of the cash and a description of any property contributed. The acknowledgement  must say whether the organization provided any goods or services in exchange for the gift and, if so, must provide a description and a good faith estimate of the value of those goods and services. One document from the qualified organization may satisfy both the written communication requirement for monetary gifts and the contemporaneous written acknowledgement requirement for all contributions of $250 or more.
  • The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
  • If the amount of a taxpayer’s deduction for all noncash contributions is over $500 additional details must be provided. See IRS Form 8283 for details.