How Are Red Cross Donations Handled for Tax Purposes?
The Red Cross is a disaster-relief agency that provides food, shelter, medical care and life-saving services in emergency situations, all free of charge to those in need. Because of its charity status, the agency is exempt from paying taxes under Internal Revenue Service rules. And because the organization is fully funded by charitable giving, donors are allowed to claim tax deductions for contributions, in most cases.
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Tax-exempt Status
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There is a difference between tax exempt and tax deductible. As a tax-exempt public charity, the Red Cross is not allowed to engage in profit-making endeavors, its officers cannot profit in any way from its operation, and the organization cannot lobby the government or legislators for its own interests. It can, however, offer donors the chance to claim a dollar-for-dollar tax deduction for monetary or tangible gifts or services.
Claiming Tax Deductions
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Only donors who file itemized tax returns may claim deductions. A tax deduction can be claimed only by donors who file itemized income tax returns (IRS 1040, Schedule A). To qualify for the deduction, donors can give amounts up to 50 percent of gross adjusted income (income after deducted itemization). Cash donations are treated differently than contributions from the purchase of fundraising items or event tickets, of which only the market value is tax-deductible. In such cases, only the difference between what the organization paid for the item, event meal or entertainment and the purchase or admission price is deductible.
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Rules for deductions
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Contributions must be made directly to the Red Cross, not to the needy in the agency's name. Deductions can only be claimed for the exact year in which the donations were made. Volunteers may claim deductions for any out-of-pocket expenses they incur but not for actual service. The fair-market value of donated goods is deductible at the "going rate." Participation in raffles or drawings is not deductible.
Acceptable IRS Documentation
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The IRS recognizes bank records or a written statement from the charity as proof of monetary gifts or property donations totaling $250 or more. The charity must detail whether any goods or services were exchanged for the contribution. For property donations valued at between $500 and $5 million, IRS form 8283 must accompany the tax return. Claims for deductions for property worth more than $5 million must by filed through a recognized professional appraisal.
Avenues for Giving
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Cash gifts can be made directly or electronically The Red Cross provides a variety of avenues for making tax-deductible donations, such as solicitations, corporate matching gifts, fundraising, its gift catalog, rewards programs, stocks, mutual funds, in-kind donations and cash contributions made online, by phone, mail, text-messaging or wire transfer.
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References
- Photo Credit military red cross image by superkiss from Fotolia.com enough! image by Alexey Stiop from Fotolia.com giving money image by Vasiliy Koval from Fotolia.com
