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Taxes and Charitable Giving

The tax consequences of charitable gifts

These days, charities need your support more than ever. As you lend a helping hand, keep the following tax facts in mind:


If you itemize, you may deduct cash contributions to qualified charities, as well as the fair market value of donated property.  You need to substantiate cash donations with a receipt. 

Contributions to religious institutions and large, national charities usually qualify for tax deductibility, while contributions to individuals don't.  If you have any doubts, you may search the IRS database here

When you donate brand-new merchandise or stocks and bonds that are publicly traded, it's relatively easy to determine market value. But what's the value of used clothing, furniture, or appliances? According to the IRS, you may deduct only the amount that someone would pay for such items in a thrift shop.

The value of your charitable services is not deductible, but you can deduct out-of-pocket and incidental expenses.   Example: You drive to a charity dinner, help out in the kitchen, and donate your favorite casserole.  You can deduct the cost of the food and your charitable mileage, but not the value of your time.

Instead of contributing cash, consider donating stock, mutual funds, artwork, or similar items that have increased in value. You may deduct the full market value of the property, and you'll avoid paying tax on the built-in capital gain.  However, you may have to get appraisals for non-publicly traded items. 

With securities that have decreased in value, it's better to sell the securities first and donate the proceeds. That way, you can deduct both your charitable contribution and your capital loss on the sale.

If you plan to make a large contribution to charity, seek tax advice before rather than after making the gift in order to maximize your tax benefits.


Good recordkeeping is required

If you plan to claim a tax deduction for charitable contributions, you need documentation to support your gift. Here are the IRS requirements:


If your donation is less than $250, your canceled check is adequate substantiation.

If you give $250 or more in a single contribution, you must obtain a written receipt or acknowledgment from the charity. The receipt must include the date and amount of the contribution, and must state whether you received any goods or services in return. If you did, it must describe them and give the estimated value of what you received. You must be able to produce such receipts if requested by the IRS, or your deduction will be denied. 

If you contribute property with a value above $500, your personal records must also include details of how and when you acquired the property and your cost basis in the property.


If you donate an item or a group of similar items worth more than $5,000, all of the previous requirements apply, but you must also obtain a qualified appraisal. There are special exceptions for publicly traded stock and, in some cases, for nonpublic stock.


If you receive anything of value in return for your donation (“quid pro quo” contributions), your deduction is limited to the difference between what you donate and what you receive.

For all quid pro quo donations over $75, the charity must provide you with a written disclosure of the value of the goods or services provided and must indicate that the deduction is limited to the difference between the donation and the value stated.
Contact Us! If you have questions or would like details about taxes and charitable giving, contact our office. We're here to help. 

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