Blog

April 17th is fast approaching and that means many of your donors and supporters are scrambling to get their tax paperwork in order. Here’s what they should know about the basic tax benefits of giving to charity.

They may qualify for an income tax deduction.

If donors elect to itemize deductions on their tax return, they may be able to take an income tax deduction for a gift to a qualified charitable organization. The caveat here is that the itemizing pays off only when donors exceed that standard deduction. The standard deduction changes each year, so it’s up to the donor to do the research.

A donation is deductible if it’s given to a 501(c)(3).

Many charitable organizations meet the IRS’s criteria, but not all. Donors should look for the 501(c)(3) designation to be sure. In general, charitable tax deductions are not allowed for contributions to an individual, a foreign government, international charities, political parties, political campaigns, social welfare organizations commonly known as 501(c)(4), or political action committees.

Non-cash donations may be tax deductible.

Sometimes supporters donate items like clothing and supplies to charities in addition to or instead of writing a check. The IRS spells out rules for such gifts. For example, for property owned for more than a year, the deduction is usually equal to the property’s fair market value. Donated clothing and household items must be in “good condition or better” and require a receipt.

What about donating that old junker that’s been sitting in the driveway for months? Maybe not so fast. To receive a deduction for any vehicle, the item must be worth more than $500. Plus, donors must have a written acknowledgment from the charity.

Volunteer hours do not qualify for a deduction.

While you may have a cohort of dedicated and loyal volunteers who pledge hours of sweat equity a year, they cannot deduct the value of their time as a charitable donation. However, they may deduct out-of-pocket expenses, such as mileage.

Donors should save receipts as supporting documentation.

To claim a deduction for cash, check, or other monetary gift, taxpayers must have written confirmation from the charity. At minimum, it should include the name of the organization, the date, and the amount of the contribution.

What about events like charity wine tastings? If donors receive some goods or services in exchange for the donation, the charity must specify the value of those goods or services. Donors may deduct only the amount of your donation that is above that value, as spelled out by the charity.

This covers the basics. If donors have specific questions pertaining to charitable contributions, they are best served by consulting a tax professional.

On Dec. 22, the president signed into law the Tax Cuts and Jobs Act, one of the largest changes to U.S. tax policy in decades. What does this mean to fundraising and operations for non-profit organizations? We break down the most sweeping changes here.