Charitable contributions, also known as charitable donations, are gifts made to qualified organizations that have obtained 501(c)(3) tax status, such as educational institutions, religious organizations, government entities, and other charities. Qualified organizations typically receive most of their funding and support from gifts, grants and contributions from the public.
From a tax perspective, charitable contributions are tax-deductible. Taxpayers may lower their yearly taxes by claiming an itemized deduction on their tax return based on the cash or fair market value of the donation, subject to a few limits. Because charitable contributions are tax deductible, taxpayers often increase their charitable donations during the holidays or before the end of the year.
What Constitutes a Charitable Contribution?
Generally speaking, a charitable contribution is anything that may be of value to a qualified charitable organization. This includes money or property in the form of cash, clothing, household items, cars, real estate, securities and other assets or services.
According to the IRS, donations to the following entities are tax-deductible, so long as they do not benefit any specific individual:
- Churches, synagogues, temples, mosques, and other religious organizations
- Federal, state, and local governments, if your contribution is solely for public purpose
- Nonprofit schools and hospitals
- Public parks and recreation facilities
- War veterans groups
- Expenses paid for a student living with you, sponsored by a qualified organization
- Out-of-pocket expenses when you serve a qualified organization as a volunteer
- Salvation Army, Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts, Girls Scouts, and many other non-profit organizations.
Conversely, contributions to the following are not tax-deductible:
- Political groups or candidates running for public office
- Professional groups (such as lawyers, doctors, civil leagues)
- Value of blood donations
- Cost of raffle, bingo, or lottery tickets
- Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups
- For-profit hospitals and schools
- Value of your time or services
Things to Keep in Mind When Making a Charitable Contribution
It is important to remember that charitable contributions must be made to a qualified organization to be deductible. Furthermore, charitable contributions may be made anytime during the tax calendar year to qualify.
Below are additional tips for making charitable contributions.
- Charitable Contributions must be itemized using IRS Form 1040.
- Clothing and household items must generally be in good used condition or better to be deductible.
- The amount of your donation might be reduced by contributions from which you may benefit. For example, if you pay $250 for the price of a $50 ticket to a charity ball, only $200 is tax-deductible, whether or not you attend the event.
- To claim a deduction for cash, check, or monetary gifts, you must keep a bank record, payroll deduction record, or written communication from the charity organization that includes the date and amount of the contribution. For contributions totaling $250 or more, you must also include a description of any property contributed, and whether any goods or services were given in exchange for the gift.
- Additional forms may be required to claim deduction for contributions over a certain amount (for example, Form 8283 for non-cash contributions over $500, and Section B of Form 8283 for contributions valued at over $5000).
Free Consultation with a Utah Tax Attorney
If you are here, you probably have a tax law issue you need help with. If so, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.
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