With the holidays around the corner, many people will be making donations to benefit charitable organizations. However, come tax time, the person who made the donation might also benefit. That’s because taxpayers who donate to a charity may be able to claim a deduction for the donation on their federal tax return.
Five Key Facts About Charitable Donations
1. Qualified Charities
A taxpayer must donate to a qualified charity to deduct their contributions. Gifts to individuals, political organizations, or candidates are not deductible.
➡️ To check the status of a charity, taxpayers can use Exempt Organizations Select Check on IRS.gov.
2. Itemize Deductions
To deduct charitable contributions:
- Taxpayers must file Form 1040 and itemize their deductions.
- To do this, taxpayers complete Schedule A, Itemized Deductions.
- They file this form with their tax return.
3. Getting Something in Return
Taxpayers may receive something in return for their donation. This can include:
- Merchandise
- Meals
- Event tickets
Taxpayers can only deduct the amount of the donation that’s more than the fair market value of the item they received.
To figure their deduction:
- Determine the value of the item received.
- Subtract this value from the total donation amount.
4. Type of Donation
For donations of property instead of cash:
- A taxpayer can only deduct the fair market value of the donated item.
- Fair market value is generally the price they would get if they sold the item on the open market.
- If donating used clothing and household items, those items generally must be in good condition.
➡️ Special rules apply to certain types of property donations, such as cars and boats.
5. Donations of $250 or More
If a taxpayer donates $250 or more in cash or goods, they must have a written receipt from the charity.
The statement must show:
- The amount of the donation
- A description of any property given
- Whether the taxpayer received any goods or services in exchange for their gift
- If so, it must provide a description and good faith estimate of the value of those goods or services
Frequently Asked Questions
What qualifies as a charitable organization for tax deductions?
To be eligible for a tax deduction, donations must be made to a qualified charity recognized by the IRS. Contributions to individuals, political campaigns, or candidates are not deductible. Taxpayers can verify a charity’s status using the IRS’s Exempt Organizations Select Check tool.
Do I need to itemize deductions to claim a charitable contribution?
Yes. Taxpayers must itemize their deductions on Schedule A of Form 1040 in order to claim a deduction for charitable contributions. Standard deduction filers cannot claim these deductions.
Can I deduct the full amount of my donation if I received something in return?
No. If you receive a benefit (such as tickets, meals, or merchandise) in exchange for your donation, you can only deduct the amount that exceeds the fair market value of the item or service received.
How are non-cash donations like clothing or household goods valued?
Non-cash donations are typically deductible at their fair market value, the price the item would sell for on the open market. Donated items generally must be in good condition or better. Special rules apply for certain types of property like vehicles or boats.
What documentation is needed for donations of $250 or more?
For any single donation of $250 or more, the taxpayer must obtain a written acknowledgment from the charity. This should include the amount or description of the donation, whether any goods or services were received in return, and a good faith estimate of their value if applicable.