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5 Things to Remember About Substantiating Charitable Donations

Jan 29, 2024

When considering a charitable donation, you have a wide array of organizations and causes to choose from. While cash donations are common, many organizations also welcome noncash contributions, including stocks, personal property, or real estate. Regardless of your donation type, you can claim a tax deduction if you opt for itemizing over taking the standard deduction.

Documentation is Key

A critical aspect of this process is documentation, which varies based on your donation's value and type. To assist you, we've compiled a list of five essential points to remember for substantiating your charitable contributions:

1. Cash contributions are easiest to substantiate if they are less than $250. Providing a credit card statement or a canceled check is sufficient. You also have the option to obtain a receipt from your chosen organization that shows its name, as well as the date, place, and amount of your contribution. It is important to remember that unsubstantiated donations aren’t deductible, so you must keep some form of bank record or receipt.

2. Noncash donations that are less than $250 require a little more work to substantiate. For this type of donation, you will need a receipt for your chosen charity. You almost must determine an estimate for a reasonable value of the item(s) that you donated. If the organization you have chosen regularly accepts noncash donations, they will typically be able to provide you the proper form. It is important to keep in mind that clothing and household item donation must be in good condition to be deductible.

3. The larger the cash donation, the more paperwork is required. If you decided to donate a cash amount that is more than $250, providing a credit card statement or a canceled check will not be sufficient. You will need an IRS-approved written acknowledgment from the organization that you have chosen to make your donation.

A contemporaneous written acknowledgment must be received on or before the date you file your return for the year in which you made the donation. The acknowledgment may also be submitted on or before the due date (including an extension) for filing the return. Additionally, this acknowledgment must include a note that discloses whether or not the charity provided anything in return. If the organization did provide something in exchange for your donation, it must provide a full description, as well as an estimate in good-faith for the item or service. In this case, you will only be able to deduct the difference between the estimated value of the service or item and the amount in which you donated.

4. More paperwork is required for noncash donations valued at more than $250 but less than $5,000. It is required that you submit a contemporaneous written acknowledgment along with evidence, in writing, that provides support for the donation’s acquisition date, cost, and fair market value. The acknowledgment must also provide a description of the item that was donated.

5. The most complicated donations are noncash contributions valued at more than $5,000. In general, both a qualified appraisal and a written acknowledgment are required—unless the donation is publicly traded securities. In some cases, additional requirements may apply to your donation, so be sure to contact your tax advisor if you have made or have plans to make a considerable noncash donation.

Whether you're considering a future donation or seeking assistance with a previous one, adherence to IRS guidelines is crucial to ensure that your generosity is also advantageous at tax time. For guidance in navigating the specifics of your charitable giving, or if you have any questions, contact your CRI advisor. They're equipped to offer the necessary support to ensure your charitable endeavors are fulfilling and in compliance with tax regulations.

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