Feeling Charitable? Be Sure You Can Substantiate Your Gifts

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As the end of the year approaches, many people give more thought to supporting charities they favor. To avoid losing valuable charitable deductions if you itemize, you’ll need specific documentation, depending on the type and size of your gift. Here’s a breakdown of the rules:

Cash gifts under $250

A canceled check, bank statement or credit card statement will do. Or ask the charity for a receipt or “other reliable written record” that provides the organization’s name, the date and the amount of the gift.

Cash gifts of $250 or more

You’ll need a contemporaneous written acknowledgment from the charity stating the amount of the gift. That means you received the acknowledgment before the earlier of your tax return due date (including extensions) or the date you file your return. If you make multiple separate gifts to the same charity of less than $250 each (monthly contributions, for example) that total $250 or more for the year, you can still follow the substantiation rules for cash gifts under $250.

Noncash gifts under $250

Get a receipt showing the charity’s name, the date and location of the donation, and a description of the property.

Noncash gifts of $250 or more

Obtain a contemporaneous written acknowledgment from the charity that contains the information required for cash gifts, plus a description of the property.

Noncash gifts of more than $500

In addition to the above, keep records showing the date you acquired the property, how you acquired it and your adjusted basis in it. Also, file Form 8283.

Noncash gifts of more than $5,000 ($10,000 for closely held stock)

In addition to the above, obtain a qualified appraisal and include an appraisal summary, signed by the appraiser and the charity, with your return. (No appraisal is required for publicly traded securities.)

Noncash gifts of more than $500,000 ($20,000 for art)

In addition to the above, include a copy of the signed appraisal, not just a summary, with your return.

Finally, if you received anything in exchange for your donation, such as a book for making an online donation or food and drink at a fundraising event, ask the charity for the fair market value of the item(s). You’ll need to subtract it from your charitable deduction.

Saving taxes isn’t the primary motivator for charitable donations, but it may affect the amount you can afford to give. Substantiate your donations to ensure you receive the deductions you deserve.

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Tracking Down Donation Substantiation

If you’re like many Americans, your mailbox may have been filling up in recent weeks with letters from your favorite charities acknowledging your 2023 donations. But what happens if you haven’t received such a letter for a contribution? Can you still claim a deduction on your 2023 income tax return for the gift? It depends.

What's Required?

To support a charitable deduction, you need to comply with IRS substantiation requirements. This generally includes obtaining a contemporaneous written acknowledgment from the charity stating the amount of the donation if it’s cash. If the donation is property, the acknowledgment must describe the property, but the charity isn’t required to provide a value. The donor must determine the property’s value.

“Contemporaneous” means the earlier of the date you file your tax return or the extended due date of your return. So, if you donated in 2023 but haven’t yet received substantiation from the charity, it’s not too late, as long as you haven’t filed your 2023 return. Contact the charity and request a written acknowledgment.

Keep in mind that, if you made a cash gift of under $250 with a check or credit card, generally a canceled check, bank statement or credit card statement is sufficient to support your donation. However, if you received something in return for the donation, you generally must reduce your deduction by its value and the charity is required to provide you a written acknowledgment as described earlier, listing the value of the item you received.

Itemized Deductions or Standard?

You may remember that in recent tax years (2020 and 2021) there was a special provision of tax law that allowed taxpayers who take the standard deduction on their tax returns to claim a limited deduction.

Many people don’t realize that this provision wasn’t reauthorized for subsequent years. Since the tax break has expired, it’s no longer available to nonitemizers. So, to deduct your charitable donations, you must opt to itemize deductions on your tax return, rather than taking the standard deduction.

Ask Questions

If you aren’t sure about some of your donations, contact the office for answers to your questions and help determining whether you have sufficient substantiation for the donations you hope to deduct on your 2023 return. It’s also important to have the substantiation you’ll need for charitable gifts you’re planning this year to ensure you can enjoy the desired deductions when you file your 2024 tax return.

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