For donations $250 or over, you must receive a contemporaneous, written acknowledgment from the charity. For the written acknowledgment to be considered contemporaneous with the contribution, a donor must receive the acknowledgment by the earlier of: the date on which the donor actually files his or her individual federal income tax return for the year of the contribution; or the due date (including extensions) of the return.
Here’s what you need from charitable organizations to claim your deductions:
- If your contribution is an outright donation of $250 or more made in cash or by check, the organization must indicate the amount that you gave, and state that you received nothing in return (or designate that a certain amount did benefit you, in which case that portion is not deductible).
- If your contribution is an outright donation of $250 or more of property, or cash and property, the organization must describe the property and state that you received nothing in return. It does not have to put a value on the property it received. For more information regarding documentation that must be provided by charitable organizations, please see our related article from the Non-Profit section of our Knowledge Center,‘Documentation Requirements for Charitable Contributions Received’.
For cash donations less than $250, all donors of charitable contributions should retain their own records for tax purposes. Whether the donations were made by cash, check, or other monetary gift, the donor must retain records that each charitable contribution was actually made, regardless of the amount. To fulfill this burden, a donor has two choices on what paperwork to retain:
- A bank record; or
- A receipt, letter, or other written communication from the donee indicating the name of the donee organization, the date the contribution was made, and the amount of the contribution.
Donations of clothing and household goods
All donations of clothing and household goods are subject to all of the regular rules on substantiation, plus the taxpayer must prove that they are items in at least good condition. Only clothing and household items in good condition or better qualify for a deduction.
There is an exception to the “good-or-better” quality exception:
- A deduction of more than $500 is claimed for the single clothing or household item, and
- You include a qualified appraisal with respect to the item with the tax return on which the deduction is claimed.
Keep in mind that the fair market value of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. Similarly, used clothing and other personal items are usually worth far less than the price you paid for them. Valuation of items of clothing does not lend itself to fixed formulas or methods.
Vehicles and boats
Donations of vehicles and boats have their own special rules. Any vehicle not used by the charity cannot be claimed as a deduction in an amount greater than the amount for which it is sold by the charity (generally the wholesale price, or lower). To regulate this, the IRS implemented the use of the Form 1098C, Contributions of Motor Vehicles, Boats or Airplanes. The charity to which you donate your vehicle must report its receipt and sale or gift of the vehicle to the IRS using this form. Additionally, to claim a deduction for the gift of the vehicle, you must receive a copy of this form from the charity, and submit it with your tax return. There are significant time constraints under which the charity must provide you with this form, although some lenient transition rules are currently in place. If you donated a vehicle to a charity, or are considering doing so, please call our office so we can help you get that deduction.
Special rules apply to contributions made to an organization by payroll deduction. You are not required to obtain a special acknowledgment from the organization, unless you have $250 or more withheld from any single paycheck. Even in that case, you can substantiate your contribution with pay stubs, your W-2 form, or any other document from your employer showing the amount withheld, and a pledge card or other document stating that the charity didn’t give you goods or services in exchange. Your employer may also prepare the pledge card under the direction of the charity.
There are additional recordkeeping rules for larger gifts of property. If you plan any unusually large gifts, there are a number of other complicated limitations that apply, and there are many sophisticated ways to structure your contributions so that both you and the organization get the maximum benefit. For example, for property valued at more than $500, you must include with your return a written description of the donated property and such other required information as the IRS may require. For property valued at more than $5,000, you also must obtain a qualified appraisal. If your contributions of property are valued at $500,000 or more, you must attach the appraisal to your return.
As you can see, claiming charitable deductions can be complicated. Please call us if you aren’t clear about what you will need to claim deductions for your contributions.