Are Nonprofit Raffle Ticket Donations Tax-Deductible?
Under Internal Revenue Service tax laws, taxpayers may claim tax deductions for charitable donations of cash and property to qualified nonprofit organizations, which are those granted 501(c)(3), or tax-exempt, status by the IRS. The IRS requires tax-exempt organizations to operate solely for one or more exempt purposes, which include charitable, educational, religious and literary. The IRS provides specific instructions concerning the treatment of nonprofit raffle ticket purchases and charitable tax deductions.
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Raffles
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Many nonprofit organizations hold raffles to raise money. People who pay for raffle tickets purchase chances to win one or more prizes during a drawing. Although raffles provide funds to support the charitable work of nonprofit organizations, the nature of raffles, which the IRS likens to lotteries and games of chance like bingo, is that ticket purchasers expect to receive something in return.
Raffle Tickets
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The Internal Revenue Service, in its Publication 526 Charitable Contributions, states that taxpayers cannot take a charitable deduction for money paid to purchase raffle tickets from nonprofit organizations. The IRS includes raffle tickets in its list of "contributions you cannot deduct."
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Financial and Economic Benefit
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IRS tax laws covering charitable deductions state that if you receive, or expect to receive, an economic or financial benefit in return for your contribution to a nonprofit organization you cannot take a charitable deduction for the portion of your contribution that represents the financial or economic benefit you receive, such as money paid for raffle tickets.
Donated Raffle Tickets
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Often, individuals who want to make a donation to a charity will purchase raffle tickets and donate the tickets back to the charities, thereby removing any chance that the donations could result in personal financial or economic benefit. A tax professional can determine whether a donation made this way is tax-deductible.
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References
- Photo Credit red ticket image by Rick Sargeant from Fotolia.com
