TIPS FOR MAKING SURE DONATIONS ARE DEDUCTIBLE FOR DONORS

All 501(c)(3) organizations understand the importance of making sure that donors know they are able to deduct a contribution to a qualified organization on their personal tax return. But is there more to it than that?

Following is some basic information that donors need to understand about charitable contributions to make sure that their donations are deductible on their personal return and not questioned during an IRS examination. A review of this list may also help your not-for-profit organization better understand what kind of documentation should be provided to a donor and to assist them in this process:

1. To be a legitimate tax deduction, then a gift must be given to a qualified organization. No deduction is allowed for contributions made to specific individuals, political organizations and candidates.


2. To deduct a charitable contribution, a donor must file Form 1040 and itemize the deductions on Schedule A.


3. If a donor receives a benefit in connection with their contribution (such as merchandise, tickets to a ball game or other goods and services), then the deduction is limited to the amount the payment exceeds the fair market value of that benefit.


4. Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible.


5. Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.


6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.


7. To claim a deduction for contributions of cash or property equaling $250 or more you must have 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. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.


8. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.