Everything You Need to Know About the Charitable Contribution Deduction

Your donations to certain organizations may give you a feeling of goodwill, but they may also bring you some tax savings and benefits. Here’s what you should know about making charitable contributions so you can maximize the deduction.

What is a Charitable Contribution?

A charitable contribution is a donation or gift made to, or for the use of, a qualified organization.

What is a Qualified Organization?

A qualified organization can be a religious organization, nonprofit school or hospital, war veterans group, or an organization such as the Salvation Army, Red Cross, or United Way. Charitable contributions can also include donations to governments for public purposes and out-of-pocket expenses incurred if you serve as a volunteer for a qualified organization.

What is Not a Qualified Organization?

Social and sports clubs, political candidates or groups, homeowners’ associations, lobby groups and many foreign organizations are not qualified organizations. Raffle, bingo, or lottery ticket costs, tuition, and value of your time and services given to an organization are also not charitable contributions.

How Can I Find a Qualified Organization?

You can search for qualified organizations on the IRS’ site by using their Exempt Organizations Select Check Tool. Not all organizations are listed here, so it's a good practice to ask the organization as well.

How Do I Claim the Deduction?

You must file Form 1040 and itemize your deductions on Schedule A. If you make noncash charitable contributions more than $500, you must complete Form 8283.

When Do I Have to Make the Contribution?

In order to deduct the contribution on your tax return, you must make the contribution by the end of your tax year. Below is a list of various payment methods and the corresponding contribution date.

 Payment Method  Contribution Date
 Mail  Postmark date
 Delivery  Date of delivery
 Credit card  Date payment is authorized by donor
 Electronic transfer  Date transfer is completed by bank
 Stock from brokerage account  Date funds are transferred to organization's account

What Records Do I Need to Keep?

A written statement from the organization or a bank record for any gift of money. All documentation should include the name of the charity, the date, and the donation amount. For gifts of money or property more than $250, the organization must give you written acknowledgement.

What If I Receive a Benefit from the Organization? (Quid Pro Quo Contributions)

If you make a contribution and you receive a benefit in return, you must deduct the fair value of goods and services received from your total contribution.

For example: You donate $100 to an organization. The organization gives you a ticket to an upcoming event that has a fair market value of $20. You can deduct $80 as a charitable contribution to the organization.

If the benefit you receive from the organization is considered a token item, you don’t have to reduce your contribution.

What is a Written Statement for a Quid Pro Quo Contribution?

Organizations are required to provide a written statement if your payment is more than $75. The statement must include a good faith estimate of the fair value of the goods or services that you received, and must say that you can only deduct the amount that is more than the value of the goods or services you received.

What are the 2017 Deduction Limits?

An individual who itemizes deductions can generally deduct contributions up to 50 percent of his/her adjusted gross income. However, the limitations can vary based on the type of organization. You can check the deductibility status of various organizations here.

Public charities, private operating foundations, federal governmental units, and supporting organizations are limited to 50 percent of your adjusted gross income. If you donate to a private foundation or domestic fraternal society, you can deduct up to 30 percent of your adjusted gross income.

To learn more, or if you have any questions regarding the charitable contribution deduction, contact your Beene Garter professional.