As we have established, giving back is cool. Even cooler is that some of your contributions could be tax deductible! Wondering which philanthropic contributions can be written off this year? Read below for the skinny.
Rule #1: Regardless of your type of donation (money, property, service), the donation is deductible only if it is made to a qualified nonprofit, tax-exempt organization. That is, the IRS has granted 501(c)(3) tax-exempt status to the group.
To find out if the organization has 501(c)(3) tax-exempt status:
Ask the group for a copy of its 501(c)(3) determination letter and letter of affirmation.
Check IRS Publication 78, a list of organizations qualified to receive tax-deductible donations. You can find at www.irs.gov.
Call the IRS’s Tax Exempt Customer Account Services line at 877-829-5500.
Contributions are not tax deductible if you:
Donate to a specific person.
Donate to a non-qualified organization.
Receive a benefit (or expect to receive a benefit) in exchange for your contribution.
Rule #2: Charitable contributions must be deducted in the year the contribution is made. Remember to keep your receipts to determine the date of the gift. The date you mail a check or the date your credit card is charged is the date you will use to determine when to report the deduction.
It is important to keep record of your donations.
For cash gifts, keep bank statements or receipts showing the charity name, the date of the contribution, and the amount.
For cash gifts of $250 or more, an acknowledgement from the charity is required, with date and amount.
For payroll deductions, a pay stub, IRS W-2 form, documentation provided by your employer, or a pledge card or document from the qualified organization is necessary.
Monetary and Property Donations
Charitable contributions of money or property to qualified charitable organizations can be deducted as long as you do not receive anything in return. For example:
You made a $100 donation to a tax-exempt organization, so you claim the full $100 deduction.
However, if you receive something in return for your donation, then you must deduct the value of what you received. For example:
I recently purchased a ticket to the Boston Human Rights Campaign Gala for $250, and the value of the meal and entertainment is worth $100. Therefore, I can only deduct $150.
Did you donate clothes or household items to Goodwill or another charity? You can deduct the fair market value (on the date of the contribution) of any property donated to a qualified charity. This means the price the property would sell at in the open market. Organizations accepting this type of donation will often provide a receipt for tax returns. If no receipt is available, check the IRS website to assess the value of your donated property.
The IRS does not allow individuals to deduct the monetary value of their volunteer service to a nonprofit on their individual income tax returns. For example:
An individual volunteers four hours of his time assisting a nonprofit organization with its social media. Normally, the nonprofit would pay a staff person for this service at a rate of $20 per hour. This service is of great value to the organization in regards to engaging people in its mission, but an individual cannot claim a monetary deduction of $80 for this volunteer service.
Expenses related to volunteering
Volunteers may be able to claim some out-of-pocket expenses as deductions on their individual income tax returns.
Guidelines for deductible expenses related to volunteering are the expenditures: 1) have not been reimbursed by the charity, 2) are directly tied to the volunteer service provided to the nonprofit, 3) have been incurred only because of the service the volunteer donated, and 4) not have been for personal, living, or family expenses.
Examples of deductible expenses are mileage, uniforms, supplies to be used while volunteering, or those related to an event or fundraiser. For example:
I recently volunteered at a BBQ for homeless individuals. I offered to purchase the hamburgers, hamburger buns, and condiments. I am able to deduct the food purchases, as well as the car mileage to and from the event on my personal income tax returns.
(Disclaimer: I am not an accountant. If you have specific questions about your possible deductions, contact your personal advisor or visit IRS.gov .)