For taxpayers who itemize, the IRS has a lot of rules about how you must report and document the charitable deductions you claim on your tax return. If you don't follow these rules, your deduction won't be allowed.
Under the Coronavirus Aid Relief and Economic Security Act (CARES Act), all taxpayers can deduct up to $300 in charitable contributions. Otherwise, only taxpayers who itemize their personal deductions can deduct charitable contributions. Most people no longer itemize because of higher standard deduction amounts established under the Tax Cuts and Jobs Act (TCJA) in 2018. As a result, as many as 95% of all taxpayers are unable to claim any charitable deductions on their tax returns, other than the one permitted cash contribution of up to $300. If you are able to claim a tax deduction, here are the rules.
Claiming a charitable deduction is simple when you write a check to a charity or make an online donation with your credit card.
For a cash gift of any amount, you need a receipt (showing the date and amount of your donation) OR a bank or credit card statement, payroll deduction record, cancelled check, or other bank record showing the transaction. Email communications are generally acceptable. If you donate through a text message, the IRS will accept the phone bill as verification if it shows the recipient organization, the amount, and the date given.
If you want to claim a deduction for a cash gift of $250 or more, you must have a written receipt, describing the gift, from the charity. To determine whether or not this requirement applies to you, you do not have to add up all your donations to a particular charity. For example, if you give the local food bank $50 every month, each contribution is separate, and the receipt rule does not apply.
The receipt should also state whether or not the charity gave you any goods or services in exchange for your gift; if so, the receipt must describe them and give an estimate of their value. The charity doesn’t have to report a low-cost item it gives to you as a token of thanks—for example, a plastic water bottle or coffee mug with the charity’s name on it.
You must get the receipt by the time you file your tax return.
Making “noncash contributions”—in other words, donating clothing, books, cars, or other items—requires more documentation and sometimes a special IRS form. It all depends on the value of your gifts.
To figure out the value of your gifts, add all the value of all similar items. For example, if you give away a hundred valuable old books, add their value together even though you might think you’re really making a lot of small gifts. The rule applies even if you give the items to different charities.
To deduct a noncash donation worth less than $250, you need a receipt with:
If you’re giving securities, you should also document the name of the issues, the type of security, and whether or not it is publicly traded.
Clothing and Household Items. Most of us, from time to time, pass on clothing, furniture, appliances, and similar household items to charities, hoping others can use them. A tax deduction isn’t the main goal, but you can claim a deduction for these items, just like more valuable ones. The items must, however, be in good condition; you don’t get a deduction for giving a charity items that really should be thrown out. You can get values for commonly donated items from various commercial software programs or at the Salvation Army’s online Valuation Guide.
If you want to claim a deduction for a gift worth $250 or more, get a written receipt from the charity that describes the gift. The receipt should state whether or not any goods or services were given to you in exchange for your gift; if they were, the receipt must describe them and give an estimate of their value. The charity doesn’t have to report a low-cost item it gives to you as a token of thanks—for example, a plastic water bottle or coffee mug with the charity’s name on it.
If you make a total of more than $500 worth of noncash gifts in a calendar year, you must file Form 8283, Noncash Charitable Contributions, with your income tax return.
You have to fill out only Section A of the form if:
If you give away property worth more than $5,000 ($10,000 for stock in a closely held business), you’ll probably need to get an appraisal. (The information goes in Section B of Form 8283, Noncash Charitable Contributions, which must be signed by the person who appraises your gift and the charity as well as by you.) An appraisal is required whether you donate one big item or several “similar items” that have a total value of more than $5,000. For example, if you give away a hundred valuable old books, and their total value is more than $5,000, you’ll need an appraisal even though you might think you’re really making a lot of small gifts. The rule applies even if you give the items to different charities.
Your appraisal must be from someone the IRS considers a “qualified appraiser.” If you don’t, you won’t be able to claim the deduction. The appraiser must sign Form 8382.
A qualified appraiser is someone who:
The appraiser you hire must be independent and impartial, so don’t hire anyone who is related to you or regularly works for you or the charity. Someone who is a party to the transaction in which you acquired the property being appraised can’t do the appraisal, unless you donate the property within two months of acquiring it, and its appraised value does not exceed the acquisition price.
Generally, the appraisal fee can’t be based on a percentage of the property’s appraised value. And you can’t take the fee you pay the appraiser as a charitable deduction. The fee could count as a “miscellaneous” deduction, but only if the value of all your miscellaneous deductions is greater than two percent of your adjusted gross income.
Special rule for gifts of art. If you donate works of art that have a total value of $20,000 or more, you must include a copy of the signed appraisal when you file your tax return. If any one piece of art is worth $20,000 or more, the IRS may ask you for an 8 × 10 color photo of it.
Many charities actively solicit the donation of used cars and other vehicles. To claim a deduction of $500 or more for a vehicle you donate, you of course need a written receipt from the charity, issued at the time you make the gift or shortly thereafter.
How large a donation you can claim depends on what the charity does with the vehicle. If it promptly sells the car without using it or substantially fixing it up, you can deduct the amount the charity receives for the car or its fair market value when you donated it, whichever is less. If the charity does use or improve the car (or gives it away as part of its charitable activities), you can deduct the fair market value at the time of the contribution. The charity typically provides this information on IRS Form 1098-C, Contributions of Motor Vehicles, Boats and Airplanes.