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Tips for Deducting Charitable Donations

by | May 19, 2014 | Estate Planning |

Deducting charitable donations is important for both the donor and the charitable organization.  To obtain a charitable tax deduction and/or to offer to the public a charitable donation opportunity, the organization MUST be a qualified organization under the federal IRS statutes and regulations.  It is the qualified organization’s obligation to provide this information to the donor, but it is strongly advised that the donor VERIFY the organization’s status as qualified.  

To deduct a charitable donation, the donor must file his/her annual tax return on the “long form 1040” and itemize the deduction.  If the donation value exceeds the sum of $250.00, in cash or property, then a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift.  

If a charitable organization is providing a benefit in exchange for a donation, then the written acknowledgment must state that along with the value of the benefit. Many charities sell tickets to dinners, breakfasts, or other events in which there is a benefit to the participant and donor.  The tickets should disclose the dollar amount of the benefit and the dollar amount of the donation on the ticket. Another common event is the “silent auction”  The donor of the silent auction item should receive the fair market value of the donation as a tax deduction. The buyer/donor of the silent auction item receives the difference between the fair market value (the sum of the donation credited to the donor of the item) and the price paid by the buyer/donor.

Properly categorizing the donation by both the qualified charitable organization and the donor is an important part of the operations and successful fund raising of charitable organizations.  The Loftin Firm, P.C. is available to assist with charitable donation issues.