Charitable contributions are donations made to qualified charitable organizations. The contributions can be monetary, or physical property. Qualified charitable contributions are deductible as an itemized deduction.
Qualified organizations can be public or private foundations. Organizations will be able to tell you whether they are considered a qualified organization for tax purposes. The limit on donations is greater for public organizations. Qualified organizations include:
- Corporations, trust funds, community chests, and foundations organized and operated for literary, religious, educational, or scientific reasons, and the prevention of cruelty to animals or children
- Fraternal orders, associations, and societies when the contribution received will be used for literary, religious, educational, or scientific reasons, and the prevention of cruelty to animals or children
- Posts and organizations of war veterans
- Non-profit hospitals and schools
- Churches, synagogues, temples, mosques, or other religious organizations
For a contribution of $250 or more, you must have a receipt in order to claim a deduction.
Although you cannot deduct the value of time you spent volunteering, you can deduct travel expenses you incurred while performing volunteer services away from home, as long as no significant part of the trip was spent for personal pleasure, vacation, or recreation. You can also deduct out-of-pocket expenses incurred in completing the volunteer services, including auto expenses, which are figured at 14 cents per mile.
Property donation amounts may vary depending on the type of organization and property donated:
- Generally, household and personal items may be deducted at their fair market value. A good way to get the fair market value of an item is to determine what the item would sell for at a garage sale, flea market, or thrift store.
- Clothing and household items may only be deducted if they are in good condition.
- Non-cash property may increase in value from the time you obtained it to the time you donated it, therefore you may only be able to deduct part of the property's value. Usually you can deduct your basis in the property (what you have invested in the property out-of-pocket) or the fair market value of the property, whichever is lower.
Documenting Your Contributions
Deductions Less Than $250
- You must obtain a receipt or letter showing the organization name, location, donation date, and item description.
- You must keep a written record of:
- The name and address of the organization to which you made your contribution
- The date and location of the contribution
- A reasonably detailed description of the property
- The fair market value of the property at the time of contribution, and how you computed the fair market value
- Your cost or basis in the property
- Whether there were any terms to your donation
Deductions More Than $250 But Less Than $500
- You must meet all documentation requirements for donations of less than $250.
- You must get and keep a written acknowledgment of your contribution, with this information:
- A description of the donated property
- Whether you were compensated for your donation
- A good faith estimate of donated goods
Deductions More Than $500 But Less Than $5,000
- You must meet all documentation requirements for donations of more than $250 but less than $500.
- You must make a record of how you acquired the property, the date of acquisition, and your basis in the property.
Deductions More Than $5,000
- You must meet all documentation requirements for donations of more than $500 but less than $5,000.
- You must get a written appraisal from a qualified appraiser.
- Donations made to specific individuals
- Donations made to political organizations or candidates
- Donations made from an IRA distribution
- The value of time you spent volunteering
- The cost of playing games of chance, including raffles and bingo
- Any contribution from which you receive or expect to receive a financial or economic benefit of equal value
The overall limitation of charitable contributions is 50% of your adjusted gross income (AGI). If your contributions exceed this limit in a given tax year, you can deduct the remainder of your contributions over the next 5 tax years.
If you receive any type of benefit from a contribution that you make, you must reduce the contribution amount by the fair market value of the benefit you received. For example if you pay $50 to attend a church luncheon, and the fair market value of the lunch is $15, you can only deduct $35 as a charitable contribution.
If you pay more than fair market value to obtain merchandise, goods, or services, the amount you pay in excess of the fair market value can be deducted as a charitable contribution. You cannot deduct the amount that would normally be paid for the acquisition.
50% of AGI Limitations
Organizations qualifying for the 50% limit include churches, educational organizations that maintain a regular student body and staff, and organizations that provide medical research, education, or care.
30% of AGI Limitations
Organizations qualifying for the 30% limit include qualified organizations considered private organizations. In addition, some capital gain properties qualify for the 30% limit.
20% of AGI Limitations
Capital gain properties donated to private organizations qualify for the lesser of 20% of your AGI or 30% of your AGI minus any 30% limitation contributions made.
For more information please refer to IRS Topic 506 - Contributions.