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Global Tax Insights

Don’t Forget to Document Your Charitable Contributions

December 16, 2015

Have you properly documented your charitable contributions? If not, you could be missing out on a tax deduction!

Donating to a qualified charitable organization is an excellent way to achieve your personal philanthropic goals. It also comes a with pretty well-known tax perk: charitable contributions are deductible on your return. Yet, what is not quite as widely known is the sort of documentation you must keep to support your charitable contributions if they happen to be challenged by the IRS.

Do all charitable contributions have to be substantiated?

No matter how large or small, all charitable contributions claimed on your tax return must be substantiated. However, what qualifies as satisfactory substantiation varies depending on the contribution type (cash or noncash) as well as the amount.

Cash contributions include those made by cash, check, electronic funds transfer, credit card, debit card, or by way of a payroll deduction.

Cash contributions less than $250

For each cash contribution you make that is less than $250, you must keep one of the following:

  • A bank record (canceled check, bank statement, or credit card statement) showing the name of the qualified organization, the date of the contribution, and the amount;
  • A written receipt or letter from the organization that includes its name as well as the date and the amount of the contribution; or
  • For a contribution made through a payroll deduction, a pay stub, W-2, or other document from your employer indicating the date and the amount of the contribution as well as a pledge card that specifies the name of the organization.

Cash contributions exceeding $250

Different requirements come into play when the cash contribution is $250 or more. For each separate contribution of $250 or more, a donor must obtain a written acknowledgement letter from the recipient organization. The acknowledgement letter must include the following:

  • The name of the recipient organization;
  • The amount contributed;
  • Whether or not any goods or services were received as a result of the contribution;
  • A description and good faith estimate of the value of any goods or services received; and
  • If applicable, a statement that the only benefit received was an intangible religious benefit (e.g. admission to a religious ceremony).

If the acknowledgement letter does not provide the date on which the contribution was made, you must also keep a copy of a bank record or receipt as support.

What about non-cash contributions?

There are four categories that noncash contributions fall into: less than $250; $250 to $500; $500 to $5,000; and more than $5,000. As the contribution amount increases, so does the documentation burden.
A few things you should keep in mind regarding noncash contributions:

  • All categories require that the donor obtain a receipt or some other form of written communication indicating the name of the charitable organization, the date and location of the property donation as well as a description of what was donated.
  • Additionally, you must keep personal records that note the name and address of the charitable organization, the fair market value (FMV) of the property when it was contributed and how the FMV was determined (if by appraisal, keep a copy of the appraisal), the basis of the property, the amount you are claiming as a deduction, and the terms of any conditions attached to the property.
  • Noncash contributions of $250 or more require acknowledgement letters that contain the same information as the acknowledgements required for cash contributions of $250 or more.
  • For noncash contributions of $500 or more, you must also maintain a record as to how you obtained the contributed property.
  • For any noncash contributions that fall into the $5,000 or more category, unless an exception applies (e.g. publically traded securities), you must also obtain a qualified appraisal.

Though specific support requirements may vary, what remains consistent is the need to have contemporaneously received the required documentation from the donee organization. Here, contemporaneous means the earlier of either: the date on which you actually file your return for the year of the contribution, or the return's due date (including extensions).

Will the charity provide documentation?

Generally, charitable organizations will provide you with an acknowledgement of your contribution; however, it is ultimately the donor's responsibility to procure the necessary documentation from the charity. Since the IRS can ask you to substantiate your charitable deduction at any time during the statute of limitations (typically three years from the latter of the due date of the return including extensions or the date the return was actually filed), you should keep the contribution support until the statute expires.

Questions? Contact any member of our Private Client Services Group.

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