November 8, 2023

Donating is a way to give back to the community and express one’s gratitude for the help they received in the past. Some people donate to charitable organizations with the same set of ideals and beliefs as they do. Donating can give you a sense of fulfillment by supporting their programs and activities in ways that you can. Not only will your chosen organization benefit from your charity works but you can also enjoy its tax deductibility.  

However, it is important to note that not all donations can qualify as a deduction. To maximize this deduction, you should know the rules and limitations on donations as set by the Internal Revenue Service (IRS). 

 IRS Rules and Requirements on Deductible Charitable Donations 

According to the IRS, you can only deduct donations or charitable contributions that are made to qualified organizations.  

Qualified organizations are nonprofit groups that are registered in the IRS as tax-exempt organizations. It generally includes organizations that are religious, charitable, educational, scientific, literary in purpose, or prevent cruelty to children or animals. You may use the following link to check if your chosen recipient is a qualified organization Tax Exempt Organization Search | Internal Revenue Service

Moreover, you can only deduct charitable donations to qualified organizations as an itemized deduction in your return. Itemizing your deductions may need more work and documentation but this option must be considered if using it can be proven more beneficial than using the standard deduction. 

Lastly, you must be able to provide documentation and keep records of all the donations made during the year to be able to claim them as deductions. Note that substantiation requirements vary depending on the amount and type of donations made. 

How Much Donations Can be Deducted? 

Generally, you can deduct cash donations up to 60% of your AGI (or Adjusted Gross Income). While in other cases the limit ranges from 20% to 50% of your AGI depending on the type of property you give and the receiving organization. The limit applies to all donations made during the tax year. 

Donations that Benefited You 

Charitable donations are made without expecting anything in return. However, if you receive a benefit from your donation, you can deduct only the excess amount after considering the value of the benefit you received. 

For example, you purchased a ticket worth $70 for a charity dinner that will benefit a qualified organization. The dinner is valued at 25. You can deduct $45 as a charitable contribution which is the balance after deducting the value of the dinner you received in exchange for your donation. 

However, receiving small token items will not reduce the value of your donation if the qualified organization determines that its value is not substantial and informs you that you can deduct the donation in full. 

Contributions Amounting to $250 or More 

If you donated at least $250 in value, the IRS would require you to secure a contemporaneous written acknowledgment of your contribution from the qualified organization to be able to claim it as a deduction. Separate contributions of smaller value should not be combined for the purpose of figuring the $250 donation. However, each donation of at least $250 requires its own acknowledgment or one acknowledgment that lists all contributions made, the date of each donation, and the total amount. Note that there are additional requirements for donations exceeding $500 and more so for those that exceed $5,000.  

Non-Deductible Donations 

You cannot claim as deduction donations made to non-qualified organizations, specific individual, political groups or candidates, homeowner’s association, labor unions, social and sports club, fraternal orders, country clubs, and other similar organizations. Also, the following cannot be claimed as deductible charitable donations: 

  • Cost of raffle, bingo, or lottery tickets. 
  • The part of a contribution from which you receive or expect to receive a benefit. 
  • The value of your time and services. 
  • Your personal expenses. 
  • The value of blood given to a blood bank. 

Out-of-Pocket Expenses 

There are those who volunteer their services or talents to a qualified organization free of charge as part of their charity work. And although you cannot deduct the cost of your service as donation, you can deduct the costs incurred in providing your service such as transportation or software cost. However personal expenses such as meals cannot be deducted unless there is a need for you to be away from home to complete the service. 

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