Uncover the Tax Basics for Charitable Contributions
You can only legitimately deduct a charitable donation if the charity is a "qualified organization." Payments made directly to individuals are not deductible as charitable giving. To see if your organization qualifies, check out the IRS's Exempt Organizations Select Check tool.
Fair market value
Sometimes you make a charitable donation and receive tickets to a ballgame, a great tote bag or some other goods or services. You can deduct only the part of a donation that exceeds the fair market value of the stuff you get in return. For example, say you donated $200 and received tickets to the opera worth $75. You can deduct only $125 on your tax return.
Proof of donation
If asked, you must be able to prove to the IRS that you made the contribution. Proof can include a bank record, payroll deduction records or a thank-you letter from the organization (preferably on its letterhead) containing the date and amount of the contribution. If you text a donation, your telephone bill with the name of the group, date and amount will suffice as proof.
If your deduction for a noncash contribution tops $500, you must fill out Form 8283, Noncash Charitable Contribution. If you make a noncash contribution of more than $5,000, you'll need an appraisal and must fill out Section B of Form 8283.
This shows how detailed, and obscure, IRS regulations in this area can be. If you're recognized as an official whaling captain by the Alaska Eskimo Whaling Commission, you may deduct any "reasonable and necessary" whaling expenses you pay to carry out sanctioned whaling activities, up to $10,000 a year.
What you can't deduct
- Contributions to an individual.
- The value of your time or services.
- Appraisal fees.
- Payments to a member of the clergy that they can spend as they wish.
- Contributions to country clubs, civic leagues, chambers of commerce, labor unions, political organizations and candidates.
Again, the rules are complex, and may change quickly, so be sure to consult with a tax professional about any charitable deductions.