The charitable contribution deduction is one of the main deductions most individuals claim on his or her personal tax return. It is also a deduction some taxpayers and practitioners claim without supporting documentation. What are the proper record keeping rules for the charitable contribution deduction?
Cash Contributions of Less Than $250
If you donated less than $250 to any one charity then you will follow these rules for proper record keeping. For example, you donated to Red Cross three times during the year, $75, $100, and $25 for a total of $200. Then you donated $200 to United Way. You would use the less than $250 rules for proper record keeping because you did not donate more than $250 to any one charity.
However, if you donated $500 to your local church by giving $10 every week during service, then you must follow the greater than $250 donation rules.
To claim a deduction for cash contributions of less than $250 given to any one charity, one of the following must be retained:
- A bank record showing the amount contributed, date of contribution, and name of charitable organization. This may include a cancelled check, bank statement, or credit card statement.
- A receipt from the charitable organization showing the amount contributed, date of contribution, and name of charitable organization.
- If you deducted from your wages, then a pay stub or W-2, and a letter from the charitable organization.
Cash Contributions of $250 or More
To claim a deduction for cash contributions of $250 or more given to any one charity, then you must retain a letter from the charitable organization detailing the amount contributed, a statement whether goods or services were provided in exchange for the contribution, and the fair value of goods or services provided if there was an exchange.
The letter from the organization must be dated by the due date, including extensions, for filing the tax return.
If you do not have a letter, then you can not claim a deduction. Also, you can not claim the deduction if you obtain the letter at a later date due to an IRS audit.
Noncash Contributions of Less Than $250
Noncash contributions are treated a little differently than cash contributions. These rules apply for the total amount of noncash contributions regardless of how many charities you donated to. For example, you donated $100 worth of goods to Red Cross and $400 to United Way. You would use the $500 and greater noncash contribution rules for record keeping purposes.
For noncash contributions of less than $250, you must retain the following:
- A receipt from the charity showing the name of the organization, date and location of donation, and reasonably detailed description of property
- An estimate of the fair market value of property donated
- Determine the original cost or basis of the property donated
- The amount you claimed as a deduction
Noncash Contributions of More Than $250 and Less Than $500
These rules are in addition to the rules stated for less than $250 noncash contributions.
- Written acknowledgement from charity
- The written acknowledgement should include a description, whether goods or services were provided in exchange for the donation, and fair value of goods and services provided if there was an exchange.
- The acknowledgement must be dated prior to the due date of your return, including extensions.
Noncash Contributions of More Than $500 and Less Than $5,000
These rules are in addition to the rules stated for more than $250 and less than $500.
- Documentation on how you obtained the property whether you received it by purchase, gift, exchange, or inheritance
- The estimated date you obtained the property
- Purchase price or cost basis of property
Noncash Contributions of $5,000 or More
If you have a contribution of $5,000 or more, you will need to follow all the rules stated previously. Also, you will need obtain a qualified appraisal of the donated property from a qualified appraiser.
If you read all these rules, you will realize that claiming charitable contributions on your return is not given. Proper record keeping is required to claim charitable contributions on your tax return.
If you have any question on charitable contributions or you are being audited due to claiming charitable contributions, call ALG Tax Solutions 855-MI-Tax-Help (855-648-2943) or provide your contact information online. We can help by representing you.
IRS Circular 230 Disclosure: To the extent this writing contains advice on a federal tax issue, the advice is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.