Deducting Donations at Tax Time

Wise Giving Wednesday: Deducting Donations at Tax Time was originally published on BBB Wise Giving Alliance, a Community Health Charities partner. 

In recent months, concerns were raised about the impact of U.S. tax law changes in 2018 since, among other things, the increase in the standard deduction to $12,000 per individual or $24,000 per couple, could reduce the incentive for some households to get a charitable deduction since fewer tax filers would itemize on their returns. While it is too early to tell if this fear will materialize, those claiming charitable deductions on their 2017 income taxes, should still keep in mind the following fundamentals.

One can claim a charitable deduction for contributions made to organizations tax exempt as charities under section 501(c)(3) of the Internal Revenue Code and to veterans organizations tax-exempt under section 501(c)(19) of the Internal Revenue Code.  Contributions to other tax-exempt entities are generally not deductible as charitable gifts. To verify a group’s tax-exempt status visit the following IRS web page: https://www.irs.gov/charities-non-profits/exempt-organizations-select-check

If the charity sends you something of value in response to your gift (for example, a stuffed animal, book, or concert tickets) only the portion of your donation above the fair market value of what you receive would be deductible. The charity will usually remind you about this in their acknowledgement or thank you message.

Direct contributions to needy individuals, are generally not deductible as charitable gifts. While it is clear that one can’t deduct handouts made to the homeless, the deductibility of gifts made to crowdfunding postings can be a bit cloudy depending on the fact circumstances.

If a donor contributes to a charitable project that has been posted to a crowdfunding site that is owned and managed by a 501(c)(3) charity, the donation generally will be deductible. If, however, one contributes to a charitable project on a crowdfunding site that is owned and managed by a for-profit company, one needs to be cautious since the deductibility can be impacted by whether the payment platform used by the site sends the gift directly to the specified charity. If the crowdfunding posting, however, is to help a specific named individual (for example to fund a dream overseas trip) there is little chance for donors to claim a deduction.

Finally, the value of volunteer time or services to a charity is not deductible. Out of pocket expenses, such as gas and travel expenses directly related to the volunteer service will usually be deductible.