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 thePension 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.
Fair Market Value of Contributed Property
You must make an assessment of the fair market value of the property you contribute.
You must make an assessment of the fair market value of the property you contribute.
Non-Cash Contributions Totalling More Than $500
You must attach IRS Form 8283 if your total non-cash contributions exceeds $500.
You must attach IRS Form 8283 if your total non-cash contributions exceeds $500.
Car Contributions: Must Have Written Acknowledgement
If you contribute a car, truck, boat, airplane, or other vehicle, and the vehicle is worth more than $500, you must received a written acknowledgement from the non-profit before you can claim a tax deduction.
If you contribute a car, truck, boat, airplane, or other vehicle, and the vehicle is worth more than $500, you must received a written acknowledgement from the non-profit before you can claim a tax deduction.
Non-Cash Contributions over $5,000: Must Have Written Appraisal
If you contribute property worth more than $5,000, you must obtain a written appraisal of the property's fair market value.
If you contribute property worth more than $5,000, you must obtain a written appraisal of the property's fair market value.
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.
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:
- Publication 526, Charitable Contributions
- Instructions for Form 8283, Noncash Charitable Contributions
- Form 8283, Noncash Charitable Contributions (PDF)
- Instructions for Schedule A
- Schedule A (PDF)
- Form 1040 (PDF)
Tax Law Resources About Charitable Donations:
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