Charitable Contributions: What Can You Claim on Your Tax Return?
Charitable contributions are a common tax deduction for many of our clients, and are an excellent way to reduce your tax liability every year. However, many tax payers are uncertain which contributions qualify as a deduction. The specifications regarding this facet of tax law can be confusing, so here are a few of the basic requirements you should be aware of when determining which of your contributions can be listed on your next tax return.
Determining What Qualifies
The IRS has some rather specific requirements regarding what types of donations can be claimed on your tax return. The most common types of qualifying donations include:
- Cash donations
- Donation of physical items
- Donation of stocks
- Miles driven in behalf of the charity organization
- Costs incurred during volunteer work (e.g., supplies purchased for a Habitat for Humanity project)
All of these different types of donations can be claimed on your tax return, provided that that are given to a qualifying institution. This can be a bit tricky to figure out, and it’s generally best to verify that the organization you are donating to is a qualifying non-profit. However, here is a list of the types of organizations that usually qualify:
- Religious organizations (temples, mosques, churches, etc.)
- Nonprofit schools
- Nonprofit hospitals
- Federal, state, and local governments (if the donation is made for a public purpose, such as improving a public park)
- Certified charity groups (Goodwill, Red Cross, the Salvation Army, etc.)
You should always do your research before making a donation to a group you are unfamiliar with. Not only will this help you to know whether or not your donation is tax-deductible, but it will also help you to avoid falling victim to a scam.
Common Items That Do Not Qualify
Certain types of contributions, or contributions made to certain types of programs, do not qualify as a tax deduction. Many of our clients, however, are not aware of this and will often try to claim these contributions on their returns. Here are some of the most common types of non-qualifying charitable contributions that we see from our clients:
- Donations to for-profit groups and businesses
- Donations to Kickstarter and GoFundMe campaigns, or other online fundraising pages
- Donations to an individual (e.g., paying a student’s tuition or paying off a loan for a family member)
- Payments made to HOAs and country clubs, or similar groups
- Approximate value of blood donated
- Estimated value of personal time or services given for volunteer work
Please note that this last item applies to any kind of organization; even if you are volunteering for a certified charity group, the hours you donate cannot be valued and listed as a charitable contribution on your tax return. While all of the donation types listed above are admirable causes, they do not qualify as a tax-deductible charitable contribution, and so cannot be claimed on your tax return.
How to Claim Your Deductions
When it comes to claiming charitable contributions on your tax return, it is always best to keep detailed and accurate records regarding your donations. Some examples of accurate records might include:
- A statement of tithes paid to your church
- A mileage log detailing miles driven for a volunteer organization
- Receipts of costs incurred during volunteer work
- A statement from your broker for stocks donated
- Receipts for items donated to Goodwill or similar industries
Official documentation is always better than personal records, wherever possible. However, where official documents are unavailable, it is vital that you keep written records of any cash or items donated to a charity or qualifying institution. Of course, keeping physical copies of all these pieces of paperwork can take up space, and they can be easy to lose. We strongly recommend taking pictures of receipts and keeping electronic copies of other documents in a cloud-based storage system, so that you can keep the records organized and easily accessible if they’re needed.
If you claim a charitable contribution on your return, and you are audited after filing, it’s important that you have these records available. Without them, the deduction will be removed, and you could find yourself facing fines and other fees from the IRS.
So, remember to ensure any donation you claim is a qualifying type of contribution, and that you are giving it to a certified non-profit, if you wish to claim it on your tax return. And when you make the donation, make a record of it, and store it somewhere you can access it when you file your return. If you’re ever uncertain about whether or not a donation qualifies as a tax deduction, it is always best to make a record of it. When tax season arrives, bring your records to one of our CPAs, and we’ll help you to determine whether or not the donation can be added as a deduction on your tax return.