The closer details of charitable deductions on taxes only matter if a person is itemizing deductions on their tax filings. If so, you are able to deduct contributions up to 50% of your adjusted gross income when they are made to qualifying 501(c3) entity or other qualifying organization. Some organization types only qualify for a 30% limitation private foundations, others qualify for a 60% limitation (federal government units).
If you’re concerned with the tax-deductible status of your donations, you may request verification from the charity of your choice (ask to see a copy of their latest IRS 990 or a copy of their IRS 501(c)3 determination letter). You can also use irs.gov or guidestar.org to search for documentation.
What can and can’t be deducted?
In order for a donation to be deducted, it needs to be truly charitable. No goods or services can be received in exchange for the donation that is considered tax-deductible.
If you attend a charity dinner and paid $500 for your ticket, you’ll need to find out how much was spent on the meal and beverages you received because you are only allowed to deduct the amount that exceeds the cost of your event attendance. Similarly, charity concerts, golf outings, and auctions are all types of events when your full donation amount may not count toward your charitable donation. You may pay $500 to play in a charity golf outing but find out that the charity spent $300 per player for gifts and greens fees. In this case, you would only be able to deduct $200, not the entire $500 you spent.
It is up to you and your accountant to determine this amount by coordinating with the charity. If the charity is doing their job correctly, they will make it easy for you by adding it to the gift acknowledgement. For example, it should read: “$100 contributed. $60 total deductible donation after receipt of goods and services.”
Do people need to keep track of receipts?
Everyone should keep careful track of charitable contribution receipts, just as they would any other household or business expenses. Most nonprofits have a donor database system to keep records on gifts though and should be able to print you a new one should you lose yours. Some nonprofits will mail out a statement of giving around January or February each year which will include a complete history of your giving for the year – this document can be used for accounting purposes in place of the receipts of each individual gift you made to them that year.
Blackbird Philanthropy Advisors is a social enterprise devoted to Driving impactful and innovative change through philanthropy. Based in South Bend, Indiana, USA.