Camile Smith, CPA

Donations to charitable organizations can be a great way to both lower your tax liability and support causes you care about. When making your donation, keep in mind the IRS has specific requirements in order for your charitable contribution to be tax deductible. To deduct a donation you will need to itemize your deductions, donate to a qualified organization, and keep records.

First and foremost, for any charitable contribution you make to be deductible, you must itemize your tax deductions. If you claim the standard deduction, you will not be able to deduct any donations. For 2015 the standard deduction is $6,300 for singles and $12,600 for married filing joint.

Next, research the organizations to which you are considering making donations. Unfortunately, not all charities are equal. Some use donations more effectively and are more transparent than others. In 2015, the Federal Trade Commission took unprecedented legal action against several charities for over $187 million in charity fraud.

Not all nonprofits are qualified charitable organizations. The IRS only allows deductions for donations to qualified tax-exempt organizations. A site like Guidestar or CharityNavigator can help you find reputable charities that are also qualified tax-exempt organizations.

Once you have made a donation, you will need to be able substantiate it in case the IRS has questions. Generally, for donations over $250 of either cash or property the IRS requires a special receipt from the charity, known as a letter of acknowledgement. You must obtain a copy of this letter prior to filing the tax return on which you are claiming the donation deduction, or the tax return’s due date (including extensions). The letter of acknowledgement must have the following elements:

  • It must be written,
  • The amount of cash and/or description of property donated,
  • If you received any goods or services, as well as a good faith estimate of their value, received as a result of the donation,
  • Or if applicable, a statement that the only benefits received were intangible religious benefits.

For additional guidelines for substantiating charitable deductions, see the “Tips for Year-End Charitable Contributions” blog by Glenn Bailey.

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