Six Tips for Deducting Charitable Gifts

As the year draws to a close, many of us make last minute donations to charities. Here are some of the IRS rules to follow to ensure your gifts have the tax treatment you expect:

  1.  If you donate clothing and household items, be sure they’re at least in good used condition. You’ll need a written acknowledgement from the charity for all gifts worth $250 or more, including a description of the items contributed. If you claim a deduction of more than $500 for an item not in good used condition, you’ll also need to include a qualified appraisal with your return.
  2. In order to claim a deduction, you need a bank record or written statement from the charity, regardless of the amount. Bank records include canceled checks and bank statements, and the transaction posting date for credit card payments.
  3. Any single contribution of $250 or more requires a letter or receipt from the charitable organization with an acknowledgement outlining the value of any goods or services that were provided in exchange for the contribution. If no goods or services were received by you from the charitable organization, the acknowledgement must have a definitive statement that no goods or services were provided in exchange for your contribution. Bank or credit card records are not sufficient. This includes cash, noncash, or out-of-pocket expenses in doing volunteer work. Although you are not required to attach the letter or receipt to your tax return, the letter or receipt must be received by the date the tax return is filed or the due date for filing the return, whichever is earlier.
  4. You can make contributions in cash, checks, electronic funds transfer, credit card payment, or payroll deduction. If you contribute through payroll deduction, retain a pay stub, a Form W-2 or other document provided by your employer which shows the total amount withheld along with documentation of the name of the charity.
  5. Deductions can be claimed for the year in which they’re made. Donations charged to a credit card before the end of 2014 count for 2014, even if the credit card bill isn’t paid until 2015. Checks written and mailed in 2014 count for this year, even if the charity doesn’t receive them until 2015.
  6. Ensure that you’re donating to a qualified charity. The IRS website provides a searchable online database which can be found by clicking here. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they’re not listed in the IRS database.
    For more information, check out IRS Publication 526, Charitable Contributions, Publication 1771, Charitable Contribution Substantiation and Disclosure Requirements, or their online mini course entitled, “Can I Deduct My Charitable Contributions?