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What You Should Know About Substantiating Charitable Donations

There are countless qualified charitable organizations which you might choose to donate to and numerous ways to donate.  Whether you give cash or contribute non-cash items such as books, sporting goods, or computers, you’ll need documentation in order to properly claim a tax deduction.  Specifically what you’ll need depends on the type and value of your donation. Here are some tips that can help you assemble the proper documentation in varying circumstances:

 

For Smaller Donations

Cash contributions of less than $250 are the easiest items to substantiate. A canceled check, credit card statement, or receipt from the qualified recipient organization is sufficient proof that you’ve made a cash donation as long as it shows the name, donation date, and the contribution amount. Bear in mind that unsubstantiated contributions aren’t deductible so it’s imperative that you be able to show the donation via a receipt or bank record.

Non-cash donations of less than $250 require a bit more substantiation. If you’re making a donation that isn’t monetary, you’ll need a receipt for your donated items from the charity. You’ll also typically have to estimate a reasonable value for the donated item(s) and provide a detailed description of the item(s). Additionally, the receipt should include the name and address of the charity, date of donation, and the cost basis of the item(s) donated.  Organizations that regularly accept non-cash donations will usually provide you with a form for doing so. Keep in mind that, for donations of clothing and household items to be deductible, the items generally must be in good (or better) condition. 

 

Larger Donations Mean More Paperwork

Cash donations over $250.  If you donate $250 or more in cash, a canceled check or credit card statement won’t be sufficient. You’ll need a contemporaneous written acknowledgment which meets IRS guidelines from the qualified recipient organization.

Among other things, the written acknowledgment must be received on or before the earlier of either 1) the date you file your return for the year in which you made the donation or 2) the due date (including an extension) for filing the return. In addition, the acknowledgement must include a disclosure of whether the charity provided anything in exchange. If it did, the organization must provide a description and good-faith estimate of the exchanged item or service. You can deduct only the difference between the amount donated and the amount of the item or service you received, as reported by the charity.

Accounting for larger non-cash donations.  If you’re making a contribution that is not in cash, how you keep your records will differ, according to the dollar value of the contribution, as follows:

  • Non-cash donations valued at $250 up to $500. You must get a contemporaneous written acknowledgment that includes the same information listed for items under $250, including the acquisition date, cost, and fair market value for non-cash donations that fall within this range.  Each contribution over $250 will require a separate acknowledgement (or details of each item over $250 donated will have to appear on a consolidated acknowledgment).  These statements should also include whether the organization gave you any goods or services in exchange for your contribution. 
  • Non-cash donations valued at between $500 and $5000 require still more. In addition to the acknowledgement detailed for contributions between $250 and $500, for items between $500 and $5000, you must also detail how you acquired the item(s) – through purchase, as a gift, exchange for other goods and services, or through inheritance, for example. 
  • Non-cash donations valued at more than $5,000 are the most complicated. Generally, both a contemporaneous written acknowledgment and a qualified appraisal are required for donations falling into this bucket — with some exceptions. In certain cases, additional requirements might apply. 

Be sure to contact your Untracht Early advisor if you’ve made or are planning to make a donation. We can verify that the type of documentation you have in your records appropriately covers the various donations you’ve made and that all requirements have been met.

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