There are two kinds of charitable donations you can make: Cash and Everything Else.
Cash Donations
Cash charitable donations are deductible when made to a qualified charitable organization, and are limited to 50% of your income.
This 50% limit is imposed on your total charitable deduction, cash plus non-cash donations.
Everything Else
Goods donated to a charity are valued at fair market resale price. This might be the Blue Book value of a used vehicle or the price a charity outlet store could sell the item for.
Time & Service
One commonly asked question is:
Can I get a deduction for donating my time and services to a charity?
The answer unfortunately is “No“. Nothing is allowed for donations of time to a charity. Out-of-pocket expenses are a different matter and are treated as a cash donation. Examples of allowable out-of-pocket donations are phone call expenses, driving mileage and supplies needed to perform your service.
An Alternative
Consider donating appreciated stocks or mutual funds to charity. You avoid the capital gains and get to take the charitable deduction for the fair market value of the investment!
Example: Let’s say you invest $1,000 in a mutual fund and it grows to $2,000. You donate the Mutual fund to charity. You pay NO tax on the capital gain AND you get to write off $2,000! Be careful though. If you cash in the fund first and then donate the proceeds you DO pay the gain tax. You’ll still get to write off the amount you give away. Timing is everything.
GIVER BEWARE!
Keep Good Records — You must maintain good records of any contribution you make whether cash or non-cash. Follow the requirements outlined below when documenting contributions:
| AMOUNT | NON-CASH | CASH |
|---|---|---|
| Less than $250 | Receipt Required | Receipt Required |
| $250 to $499 | Receipt required and contemporaneous written acknowledgement from the charity | Receipt required and contemporaneous written acknowledgement from the charity |
| More Than $500 and Sold by Charity | Receipt required and Form 1098- C showing charity’s sales price, and attach 1098-C to Form 1040, and deduction limited to 1098-C amount | Receipt required and contemporaneous written acknowledgement from the charity |
| More Than $500 & Less Than $5,000 and Retained for Use or Improved by Charity | Receipt required and Form 8283 and contemporaneous written acknowledgement meeting certification of non-sale requirements, deduction allowed at fair market value using private party sales pricing guidelines in used vehicle pricing guides | Receipt required and contemporaneous written acknowledgement from the charity |
| Over $5,000 and retained for use or improvement by charity | Receipt required and written appraisal and signed Form 8283 and contemporaneous written acknowledgement meeting certification of non-sale requirements, deduction allowed at fair market value using private party sales pricing guidelines in used vehicle pricing guides | Receipt required and contemporaneous written acknowledgement from the charity |
| Over $500,000 | Receipt required and written appraisal (attached to Tax Form) and signed Form 8283 and contemporaneous written acknowledgement meeting certification of non-sale requirements, deduction allowed at fair market value using private party sales pricing guidelines in used vehicle pricing guides. | Receipt required and contemporaneous written acknowledgement from the charity |
NOT QUALIFIED!
Not Qualified as Charitable Organizations — Here is a partial list of organizations that do NOT qualify as charitable organizations. Give them a donation and there is no tax deduction allowed.
A deduction for an amount used to maintain certain full-time students as a member of the taxpayers household is allowed. The amount is limited to $50 per calendar month and the student must be in the twelfth grade or lower. An example qualifying under this exception would be the cost of hosting a foreign exchange student.