Americans are the most charitable people in the world, as evidenced by records of our annual charitable giving. Congress has been very generous in the passage of laws regulating deductions for charitable giving. Consult IRS Publication 526 for regulations governing the many aspects of charitable giving and the required documentation.
In order to be deductible, a donation must be made to a tax-qualified IRC Section 501(c)(3) charity. Donations to individuals, political groups, social and sports clubs, unions, lobby groups, homeowners associations and most foreign organizations are not deductible. “Donations” to your children are similarly not deductible.
Out-of-pocket expenses while volunteering for a qualified organization are deductible, as is mileage at 14 cents per mile. Your time is not an expense and is not deductible.
No deduction is allowed unless the taxpayer has either bank records of the contribution or a written acknowledgement of the gift from the charity. Those giving cash will need an acknowledgement. Contributions of $250 or more in one day to one organization require written substantiation from the charity. A canceled check is not sufficient.
For non-cash contributions (stuff) of $250 to $500, a written acknowledgement from the charity is required. The form must contain the name and address of the organization, date and location of the contribution, and description of the donation.
Annual contributions greater than $500 require that Form 8283 be filled out with the above information. Plus, for individual contributions of more than $500, you must list date and method of acquisition and your cost basis.
Congress members always write down the purchase date and amount paid on everything they buy so they expect you to do, too.
Contributions of more than $5,000 require a qualified written appraisal unless it is of publicly traded securities. It is better to donate appreciated securities to a charitable organization directly versus selling the securities, paying tax and donating the difference. That way the charity receives the full benefit of the securities and you get a bigger deduction.
Capital-gain property donated to a qualified organization generates a deduction equal to its fair market value at the time of donation whereas ordinary income property is limited to adjusted basis in the property.
The donation of a car has its own special regulations that restrict the deduction to the amount the charity receives when the car is sold at auction. You must receive written confirmation of this value on Form 1098-C. Cars the charity uses for its stated purpose may receive higher deductions.
I have just scratched the surface of the numerous rules governing charitable donations. You will want to discuss these rules with your tax professional and consult Publication 526 before proceeding.
