Requirements to Claim Charitable Donations

The charitable donation deduction is one of the most commonly claimed deductions, lowering the tax rate of many Americans. The deduction is received through itemized and standard deductions.  Several changes in the 1980’s led to a standard deduction that is intended to cover charitable donations for most middle and low income Americans. Therefore, taxpayers using the standard deduction do not claim charitable deductions on their return.  For those taxpayers that itemize their deductions on Schedule A, understanding the restrictions on claims is essential. 

For monetary donations, taxpayers must have some kind of documentation showing the amount donated, the date, and the recipient. A canceled check, credit card receipt or bill, or a receipt from the charity will suffice for amounts under $250.  If the donation is $250 or more, a written receipt or letter from the charity must be provided before the donation can be claimed. 

Recent tax cases have rejected deductions when the taxpayer received the acknowledgement after the taxes were filed. Assume in December of 2013 you donate $500 to your church for Christmas and then claim this on your taxes which you file on April 10, 2014. In November of 2014, the IRS audits your return and asks for the receipt from the church. Having never received it, you ask the church to provide it and in November of 2014, they send it. The IRS will not accept the receipt and will disallow the deduction. The church must provide the receipt before you file your return. It is possible to amend the return when the receipt is provided although it is best to ask for all the receipts before the April 15th filing deadline.

Receipts are also required for all non-monetary contributions. In addition, an IRS form (8283) must be completed for claiming non-cash gifts over $500 and an appraisal must be obtained for items over $5000. Non-cash gifts must be in good condition and the value of these gifts is the estimated value to the charity. If the item is sold by the charity, the selling price should be used. If the charity keeps the item, then the current value if sold today should be the amount claimed. For example, if you donate a $300 flat screen television and sells at a charity auction for $80, only $80 can be claimed regardless of what you think the TV is worth. These tighter rules are to prevent people from claiming more contributions than they actually gave to charities and higher values for items donated.

As with all tax advice, each individual situation is different and there are exceptions.  Tax information provided here is not intended to be used to avoid any federal or state penalties that may be imposed on the reader. 

Beth Logan is an Enrolled Agent for Kozlog Tax Advisers in Chelmsford.  She can be reached at info@kozlog.com.