Give Wisely: Charitable Contributions and Tax Deductions
Dec 01, 2022
’Tis the season for giving! While charitable giving is common throughout the year, November and December are the most popular months for philanthropy. With tax season just around the corner, it’s a great time to review this important information about donations and deductions.
Before You Donate
Ensure your generosity goes to a qualified organization. Charitable contributions are only tax deductible if they’re given to a nonprofit organization with tax-exempt status per section 501(c)(3) of the Internal Revenue Code. You can use the search tool on the IRS website to confirm an organization’s status.
Examples of qualified organizations include:
- Charities
- Educational services
- Community service volunteer organizations
- Religious organizations
Examples of qualified donations include:
- Monetary gifts
- In-kind donations (supplies, groceries, etc.)
- Expenses related to volunteer services
- Fuel, parking or toll expenses for delivering a donation or traveling to and from a charitable event for which you volunteered
As You Donate
When determining how much to give, keep in mind the IRS generally permits you to deduct up to 60% of your adjusted gross income each year, but lower limits apply to certain types of donations and organizations.
Keep a detailed record of all your contributions. You’ll need your receipts if you itemize your deductions or if you're audited.
Keep these additional “substantiation requirements” in mind, as well:
- Contributions worth more than $250 require a written letter of acknowledgement from the recipient. The letter must contain the amount of cash you donated or the estimated value of the in-kind donation, and whether the recipient gave you anything in exchange for your contribution.
- Deductions of $500 or more in noncash charitable contributions require a completed Form 8283. An attached appraisal is required if your items total more than $5,000.
If you give a monetary gift (cash, check, electronic funds transfer, credit card charge, or other monetary contribution), qualifying documentation includes:
- A bank record (a canceled check or a bank, credit union, or credit card statement) that includes the recipient’s name, the donation amount, and the date.
- Written communication from the recipient that includes its name, the donation amount, and the date.
- A copy of your W2 or pay stubs (if your contribution was made by automatic paycheck deduction).
After You Donate
Whether you itemize your deductions or take the standard deduction is up to you. If you itemize, you’ll need to complete Schedule A (Form 1040 or 1040 SR) when tax season arrives. For fuel-related expenses, you can either deduct the exact amount you spent or claim the standard mileage deduction on your tax return. Unsure if a donation qualifies for deduction? Check out the Can I Deduct My Charitable Contribution? tool on the IRS website.
If you exceed the 60% donation limit for your adjusted gross income, you may be able to carry over the remainder of the deduction to your following five tax returns.
With charitable giving deductions, there are lots of details to consider. You can learn more about contributions and deductions in Publication 526 from the IRS or contact us to have your questions answered by one of our tax professionals. We’re happy to help you cover all the bases and maximize your return.
