​What You Need to Know to Claim Charitable Deductions on Your Tax Return

Donating to your favorite nonprofit should make you feel good no matter what tax benefits you also get. But there’s no denying that a tax deduction can make the giving a little sweeter.

Keep in mind that not all nonprofit organizations qualify for charitable contribution deduction purposes. And not all charitable gifts are tax-deductible.

Also, the IRS provides weekly updates to its online search tool that allows users to find qualified charitable organizations. You can also use the search tool to see if an organization has had its exempt status revoked.

OK, so the donation you made is allowed, the nonprofit you donated to meets the IRS’s charitable contribution deduction requirements, and it hasn’t had its exempt status revoked. Now what?

Not shockingly, the IRS has a lot of rules around charitable contribution deductions. So, if you want to claim your contributions, you’re going to need good records.

Here’s a rundown of the rules:

Records, records, records: If you give more than $250 to a charity or nonprofit, you’ll need a written receipt from that organization. For cash, check, or other monetary donations — regardless of the amount — you’ll need:

• A bank record and written communication from the recipient organization that shows its name, the date of your donations, and how much you gave.
• A bill from your cell phone provider if you donated by text.

Any other records — like a spreadsheet of contributions — won’t pass muster with the IRS.

You can substantiate a contribution with a pay stub, Form W-2, or another document from your employer that shows the donation amount withheld if you gave through payroll deductions.

If you make separate contributions of less than $250, you aren’t subject to that written rule. And that’s true even if your contributions to the same charity total $250 or more in a year.

Property donations: If you donate property, you’ll need a receipt from the nonprofit showing the organization's name, the date and location of the contribution, and a detailed description (but not the value) of the property.

If you can’t get a receipt for some reason, you’ll need a reliable written record of the contribution. That required info usually depends on factors like the type and value of the property you donated.

• Property valued at more than $500 — Attach a completed Form 8283 Noncash Charitable Contributions to your return.
• Property valued at more than $5,000 — You're generally required to obtain a qualified appraisal and to attach an appraisal summary to the tax return. There are different rules when it comes to publicly traded securities, so talk to your tax professional about donating stocks and bonds.
• Property valued at more than $20,000 — For gifts of art valued at $20,000 or more, you have to attach a complete copy of the signed appraisal (rather than an appraisal summary) to your return. IRS may also request a photograph.
• Property valued at $50,000 or more — You can ask IRS to issue a “Statement of Value,” which you can use to substantiate the value.

Goods or services provided for your donation: If the organization you donated to provided goods or services for your contribution, they’ll need to include a good-faith estimate of that value. Also, your deduction is limited to the excess of what you gave over the value you received.

So, if you gave $100 and got a $30 dinner, you can deduct $70. There are other scenarios where your entire contribution is deductible even if you got something in return. But they’re nuanced, so again, talk to your tax pro.

Out-of-pocket costs: Again, records are really important here. You can’t deduct the value of services you perform for a charitable organization. But the IRS does allow for some deductions for out-of-pocket costs you incur while performing services.

So, keep track of your expenses, the services you performed and when, and the organization for which you performed them. Also, hang on to your receipts, canceled checks, and other reliable written records relating to the services and expenses.

There’s a lot that goes into deductions for charitable contributions, so let us know if you have questions.