Think Your Donation Is Tax-Deductible? Not So Fast

Charitable donations support a variety of causes, whether religious, social, educational, or research-oriented. Supporting causes that are important to you can make you feel like you’re making a difference. In addition to good feelings and supporting causes, charitable donations can also provide a tax benefit. There are many types of contributions, and each type has unique deductibility rules. In this article, I’ll break down contributions into deductible, not deductible, and partly deductible.

Deductible Charitable Donations

Cash Contributions

As long as you are donating to a qualified charity and have receipts, donations by cash, check, or credit card are deductible. If you itemize, only donations that exceed 0.5% of your adjusted gross income are deductible. If you take the standard deduction, single-filers can deduct up to $1,000, and married couples up to $2,000. If you’re not sure an organization is qualified, you can look it up on the IRS site.

School Fundraisers

If you donate money to a school, it qualifies for deduction under the cash contribution rules.

Church Offerings or Tithes

As above, if you donate to a qualified religious institution, it qualifies for deduction under the cash contribution rules.

Clothes, Household Items, Other Noncash Contributions

Noncash contributions are only deductible as itemized deductions. You are allowed to write off the lower of cost or current value of the items donated, and the items must be in good used condition or better. If the value is $500 or less, you just need to keep records and donation receipts. For donations worth $501 to $5,000, you’ll need to complete Form 8283 with your tax return. Finally, for donations of property in excess of $5,000, you’ll also need an appraisal.

Appreciated Securities

Donations of shares of stock or mutual funds are deductible at fair market value (if held over one year) as itemized deductions. As long as the shares are market traded, you’ll just need a receipt and completed Form 8283. Even if worth more than $5,000, you don’t need an appraisal. And the best news is you get to claim a deduction for full value without recognizing gain on the appreciation.

Out-of-Pocket Expenses

What if you buy ingredients for cupcakes to be sold at a church bake sale or buy yarn to knit hats for a hospital clothing drive? Those are considered out-of-pocket expenses and are deductible as itemized deductions.

Mileage

Let’s say you drive to an elementary school to volunteer to read to students once a week. Or you’re on the board of your local YMCA and drive to meetings once a month? You can write off $0.14 a mile as an itemized deduction.

Not Deductible Charitable Donations

Raffle Tickets

The cost of raffle tickets purchased to benefit a charitable organization is not deductible. You’re purchasing a shot at a valuable prize, and that doesn’t meet the IRS’s definition of a charitable donation.

GoFundMe

Unless the recipient is a qualified charitable organization, donations to GoFundMe are not deductible.

Political Donations

Donating to a candidate or political organization does not qualify as a charitable contribution to a qualified organization.

Your Services or Blood Donations

You didn’t pay for your services or your blood, so there’s no write-off allowed. While your services or blood have value, it doesn’t qualify for a deduction.

Partly Deductible Charitable Donations

Sometimes you pay more than fair market value to support a charity. For example, if you pay $1,000 to attend a charitable gala dinner that is worth $250, you can deduct $750. Be sure to get a statement from the charity showing the value of the gift versus the value of the dinner. Another example would be paying $500 at a charitable auction for an item that’s worth $100. Your deduction is $400. Again, be sure to get a receipt.

Familiarizing yourself with the tax benefits of charitable contributions can help your pocketbook and increase your giving power. The benefits are there for the taking!