On this #GivingTuesday, if you are thinking about making a cash gift to one or more of your favorite causes and you intend to claim a charitable contribution deduction on your 2017 income tax return for the gift(s), here are three things you will want to do.
- Only give to qualified charities. Make sure you are making a contribution to a non-profit organization that is a qualified charity under section 501(c)(3) of the tax code. The IRS has a link that allows the public to confirm whether an organization falls within section 501(c)(3), as does Guidestar.org
- Keep (or obtain) required proof of your gift. When you give a charitable gift of cash, the IRS wants you to obtain – within a limited timeframe – adequate information confirming the amount of the gift, the name of the recipient organization, and in some cases whether goods or services were exchanged in connection with the gift. The IRS has published guides [here and here] to help taxpayers with the various substantiation and disclosure requirements. The highlights of the requirements when you make a one-time cash gift depend on the amount of the gift. For each gift under $250, you must retain in your records at least one of the following: the canceled check, your bank statement, a credit card statement, or a contemporaneous receipt from the charity evidencing the gift. For each gift of $250 or more, you must also have a contemporaneous note from the charity detailing the amount contributed, as well as stating whether the charity provided you any goods or services in exchange for the gift, with a description and value of any such goods or services. (An exception to this is when the goods and services are insubstantial in value, such as a trinket with a logo or a benefit stemming from a low-cost annual membership.) All charitable receipts must be in hand by the earlier of the date you file your return and the due date of your return, including extensions. Written acknowledgements received by these dates will be considered “contemporaneous.”
Make sure your gift is for a deductible purpose. Not all contributions to non-profit organizations carry a tax benefit with them. For example, you cannot claim a charitable deduction for the cost of raffle tickets to support a charity or for your payment of college tuition.
At income-tax time, you bear the burden of proving to the satisfaction of the IRS that your charitable contribution meets the criteria for a deduction. The IRS has repeatedly disallowed deductions for donations, even when it is clear that the charity received the funds, when the taxpayer’s substantiation failed to meet IRS standards.
For more details on the substantiation requirements for a host of charitable contributions, see previous posts one and two on Generation to Generation co-authored with my colleagues John A. McBrine and TaraLynn A. Casperson.
- Editor in Chief, Co-Chair, Nonprofit and Social Impact practice group
- Chair, Tax Department and Co-Chair, Nonprofit and Social Impact practice group