What Qualifies as a Charitable Deduction?
A taxpayer can deduct the cash and property donations to charities from their income when filing federal and state income tax returns. According to the Internal Revenue Service, the taxpayer must be eligible to itemize deductions to claim charitable contributions. A taxpayer who claims the standard deduction is unable to deduct charitable donations.
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Donor Benefits
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To receive full credit for a charitable donation, you cannot receive any benefit from the organization. For example, a donor may receive discounts for concert tickets or football games when donating to a charity. The donor can still claim a charitable deduction, but must subtract the amount of the discount from the donation's deductible value. If the benefits are worth more than the donation, you cannot claim a deduction.
Qualified Organizations
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Only the donations you make to an IRS qualified organization are eligible for a charitable deduction. Generally, any nonprofit organization that limits it operations to the promotion of literary, educational, religious, charitable, scientific and humanitarian causes will qualify. The IRS also allows U.S. taxpayers to claim a deduction for donations to organizations in Canada, Mexico and Israel as a result of income tax treaties.
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Record Keeping
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The IRS has different record-keeping requirements based on the donation's value. For each cash donation below $250, you must retain either a bank statement or a written receipt from the charity. Cash donations of $250 or more require you to also obtain a written acknowledgment from the charity. If you donate property, the record-keeping requirements become more burdensome as the property's value increases. However, all property donations with values in excess of $5,000 require you to obtain an appraisal and submit Form 8283 with your tax return.
Non Cash Donations
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A donor can receive a charitable deduction for donating their time or by hosting a foreign exchange student. You are eligible for a monthly deduction of $50 for each month an exchange student resides with you for at least 15 days. When you volunteer your time with a charity, you may deduct your out-of-pocket expenses but not the value of your time.
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References
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