If you itemize deductions and donate to philanthropic causes, you may qualify to deduct your charitable donations—but there are important requirements you must meet. For instance, you must substantiate charitable gifts with proper documentation to satisfy the IRS. Failing to meet these substantiation requirements can cost you the deduction even if your charitable gift is legitimate.
Documenting cash donations
No matter the amount, cash donations must be supported by one of the following:
Bank records
This includes bank statements, electronic fund transfer receipts, canceled checks—or scanned images of both sides of a check from your bank’s website—and credit card statements.
Written communication
This includes a letter or email from the charitable organization specifying the donor’s name, date of the contribution, and amount. Note that a blank pledge card from the organization does not qualify as proper documentation.
For cash donations of $250 or more, you’ll also need a contemporaneous written acknowledgment (CWA) from the organization that includes the following details:
- The amount of the contribution
- A description and reasonable estimate of the value of any goods or services received in exchange—in whole or in part—for the donation
A single document to satisfy both the written communication and CWA requirements. To qualify as “contemporaneous,” the CWA must be obtained by either the extended due date of your tax return for the year of the donation or the date you file your return, whichever comes first.
Documenting noncash donations
For noncash donations valued at less than $250, you’ll need a receipt from the recipient organization that includes their name and address, the date of the contribution, and a detailed description of the donated property. Additional documentation may be required for donations of $250 or more depending on the value of the contribution. For instance:
- $250 to $500. These require a CWA.
- Over $500 but not exceeding $5,000. In addition to a CWA, you must complete Section A of Form 8283, which includes a description of the property, its fair market value, and the method used to determine that value. This section must be filed with your tax return.
- Over $5,000. In addition to the requirements above, you must also obtain a qualified appraisal of the property and complete Section B of Form 8283, signed by both the appraiser and the donee. Certain situations may require further documentation. For example, if you donate art valued at $20,000 or more, or any donation over $500,000, a copy of the appraisal must be attached to your return.
Note: No appraisal is required for donations of publicly traded securities.
Specific rules may apply to certain types of property, including vehicles, clothing, household items, and securities.
The rules are complex
The regulations surrounding charitable donations and their substantiation are complex, and even a small mistake can cost you a valuable tax deduction. If you’re unsure, reach out to your Smolin advisor for guidance to make sure you’re in full compliance.