Kutchins, Robbins & Diamond, Ltd. Certified Public Accountants and Advisors

Charitable Giving: Acknowledgement and Substantiation

The Tax Code encourages charitable giving by allowing an income tax deduction. However, certain requirements must be followed to in order to claim the deduction.

Acknowledgments

The IRS requires that a contemporaneous written acknowledgement be received from the charitable organization for most charitable donations in order to claim a tax deduction.

The written acknowledgement must state, among other things, that no goods or services were provided in exchange for the contribution, or state the value of any goods or services that were exchanged for the contribution.

If the contribution is a one-time donation of $250 or more made in cash or by check, the organization must state the amount of the donation.

If the contribution is a one-time donation of $250 or more of property, the organization must describe the property donated, but does not need to put a value on the property it received.

Most charitable organizations send out these acknowledgements by January 31st of the next year. If you don’t have an acknowledgement by April 15th, filing an extension can give you extra time to receive the acknowledgment.

Cash Donations of Less Than $250 

All donors of charitable contributions by cash, check, or other monetary gift must retain records that each charitable contribution was actually made, regardless of the amount. A donor should retain either a bank record or receipt from the organization stating the date and amount of the donation.

Donations of Clothing and Household Goods

All donations of clothing and household goods are subject to all of the regular rules on substantiation, plus the taxpayer must prove that they are items in at least good condition.

Typically, the fair market value of used goods such as furniture, clothing and appliances, is substantially less than the price you paid for them.

Vehicles and Boats

The charity to which you donate your vehicle must report its receipt and sale or gift of the vehicle to the IRS using Form 1098-C, Contributions of Motor Vehicles, Boats or Airplanes, and send it to you. In order to claim a deduction for the vehicle, you must submit a copy of the form with your tax return.  In general, your contribution will be limited to the amount the charity received for selling the vehicle.

Payroll Deductions

For payroll deductions made to charitable organizations, there is no need to receive a written acknowledgment from the charity, unless you have $250 or more withheld from any single paycheck. And, even in that case, you will be able to substantiate your contribution with pay stubs, your W-2 form, or any other document from your employer showing the amount withheld, and a pledge card or other document stating that the charity didn’t provide any goods or services in exchange for the contribution.

Larger Gifts

For contributions of property valued at more than $500, you must include with your return, a written description of the donated property and certain other information that the IRS requires. For property valued at more than $5,000, other than marketable securities, you must also obtain a qualified appraisal. If your contributions are valued at $500,000 or more, or for artwork valued at $20,000 or more, you must attach a copy of the signed appraisal to your return.

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