As a CPA working with nonprofits for just over 30 years, I’ve often been asked about the proper documentation and processes to claim your charitable giving when filing taxes.
To help you get ready for tax season as the year draws to a close, here are the top things to keep in mind:
1. Before anything else, check to make sure an organization is qualified.
You can always ask any organization whether it is a qualified organization, and most will be able to tell you. You can also go to IRS.gov and search for qualified organizations, or call the IRS at 1-877-829-5500.
2. You’ll need documentation that you gave to a nonprofit. For gifts of more than $250, that must directly come from the organization.
Donors cannot claim a tax deduction without a record of the gift [PDF]. This could be a bank record (like a cancelled check) or a written communication from the organization (such as a receipt or letter). These have to show the name of the organization, the date of the gift and the amount.
For a gift of more than $250, you MUST obtain a “contemporaneous, written acknowledgement of the contribution” from the organization. Keep in mind: the organization doesn’t incur a penalty for not sending you a notification, so the burden is on you as the donor to get this acknowledgement. Despite that, many organizations assist donors by providing a timely, written statement.
How does this all work for payroll deductions? You can use a pledge card prepared by or at the direction of the organization along with a pay stub, Form w-2, Wage and Tax Statement or other document furnished by your employer that shows the amount withheld. From our end, UWATX regularly sends out donation receipts through out the year and tax receipts in January. You can also contact us to request any of these items.
3. You’ll also need to show the date you made the gift.
Your gift must be date stamped by Dec. 31 in the year that you wish to claim it. That could be a postmark from the Post Office when you mail in a check or an electronic date-stamp for the gift if you make your gift online.
4. You can deduct donations for relief efforts but not if they’re earmarked for a particular individual or family.
These donations include gifts for flood relief, hurricane relief, or other disaster relief to a qualified organization. You cannot deduct contributions that are earmarked [PDF].
5. Gifts of property and donations after a purchase can both be deducted!
If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution, meaning the price at which property would change hands between a willing buyer and a willing seller. Keep in mind: you’ll want to submit Form 8283 [PDF] for a noncash contribution of more than $500 and if you want to deduct more than $5,000, you should consult the IRS’s guidelines for gifts of property.
Also, if you purchase goods or services from an organization and make a contribution on top of that, you can deduct the contribution. You’ll need a written statement from the qualified organization if the total is more than $75, which should state that you can only deduct the contribution and also offer a good faith estimate of the value of goods or services they provided.
6. Gifts of service (like volunteering your time or expertise) don’t count for deductions, but you can deduct your mileage.
You cannot deduct the value of your time or services. The logic behind this is that those services were never counted as income, unlike a financial or in-kind item.
That said, you can deduct your mileage – the costs of gas and oil that are directly related to getting to and from the place where you volunteer. If you do not want to figure your actual costs, you can deduct a per mile amount for each mile ($.14 in 2013).
7. To claim a deduction, you must file Form 1040 and itemize all of your deductions on Schedule A.
I hope these tips help alleviate some of the stress at the end of the year. Still have questions? Leave them for us in the comments.