Figuring out charitable contributions can be a tricky thing – especially when it comes to your tax deductions. How do you determine if your cash donation is deductible? What about your noncash donation?
For starters, at the Art Mission Foundation we take away the guesswork. To be a valid tax deduction, your donation must contribute to an eligible organization. An eligible organization can include a non-profit organization; a church or other religious organization; a federal, state, or local government; a war veteran’s organization; or other organizations that the IRS recognizes.
Choosing an Eligible Organization
Many organizations have their own websites, which will state whether a donation will qualify for a tax deduction. If you want to donate to an organization, but aren’t sure whether your contributions are legitimately tax-deductible, contact us and we can help.
Cash and Noncash Deduction Limitations
As much as charities appreciate donations of any amount, the IRS does have maximums on how much you can annually deduct from your taxes. Further, not all non-profits are created equal when it comes to the limitations for deductibility.
Deduction rules become a bit more complicated when you donate noncash items. This means it’s best to discuss your intent with your qualified tax professional; they can help you understand the benefits and limitations for donations of cash and noncash items.
Tax deductibility for cash donations is not as complex as noncash donations. That said, cash deductions can be limited to either 50% or 30% of your annual adjusted gross income, depending on what type of organization you donate to.
But don’t worry, if you are limited on how much you can deduct in a given year, you can carry over the excess contributions to the next tax year for a maximum of up to five years.
Proof of Donation
If you donate $250 or more at a time, you should request a receipt, or charitable acknowledgement letter, from the organization.
The charitable acknowledgement letter needs to be from the organization and needs to provide key information, such as the date of the donation, the amount donated, and whether you received any benefits from your donation.
Having this information is imperative, because if the IRS questions your donations, they will request both the charitable acknowledgement letter and either your credit card statement, bank statement, or a canceled check as proof you made the donation.
There are some instances, however, wherein obtaining a receipt is not necessary. One such instance is if you donate less than $250 at a time. Additionally, if, for example, you give your church a regular weekly donation of $25, you don’t need a receipt – even though your contributions will eventually add up to over $250.
While it’s important to have some kind of a record of every donation you make, receipts are not required for donations of under $250. Further, many organizations will send you a total at the end of the year.
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