Donations that Qualify for a Charitable Deduction
An individual’s motivation for making a charitable donation is not necessarily the charitable deduction. Nonetheless, taking advantage of the deduction is a nice benefit. Not all charitable donations; however, qualify for a charitable deduction. The following tips will help ensure the donation qualifies for the charitable deduction:
Research the charity to ensure the funds will be used for the intended purpose. Guidestar (www.guidestar.org) is a good starting point for this research.
- Donate to an eligible charity, which primarily is a 501(c)(3). To confirm the charity’s status, visit the IRS Exempt Organization Select Check Tool (https://apps.irs.gov/app/eos/).
- Make the donation in the form of cash, appreciate stock, charitable trust, gift agreement, in-kind or sponsorship (just to name a few options).
- Substantiate the donation through an acknowledgment letter from the charity. Such letter needs to state that the donor did not receive any goods or services in exchange of your donation. If you do receive any goods or services (e.g. dinner), then deduct from the donation an amount equal to the goods or services received. (See Publication 1771 for more details: https://www.irs.gov/pub/irs-pdf/p1771.pdf).
- Take the deduction on your tax return. You may donate up to fifty percent (50%) of your adjusted gross income (depending on the type of donation and organization); however, the available deduction will phase out depending on your income level (coordinate with your accountant or tax/non-profit attorney). IRS Publication 526 has more detailed information regarding taking charitable deductions on your 2016 tax return (https://www.irs.gov/pub/irs-pdf/p526.pdf).
For more information about charitable deductions or how charitable donations may be an important part of your estate planning, contact one of our estate and trust attorneys.