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Charitable Giving

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Charitable giving is when a person makes voluntary, tax-deductible donations or gifts to a qualified organization without the donor receiving or expecting a substantial return benefit. In general, qualified organizations are exempt from federal income tax as section 501(c)(3) organizations and pursue purposes that are charitable, educational, scientific, or literary, or that seek to prevent cruelty to children or animals. Other organizations eligible to receive deductible donations are governmental entities, veterans organizations, domestic fraternal societies (section 501(c)(8)), and cemetery companies (section 501(c)(13)).

To determine whether an organization is qualified, a potential donor can search for charities on IRS.gov or consult the Exempt Organizations Master List, or IRS Publication 78, which lists section 501(c)(3) organizations eligible to receive deductible charitable donations. Churches, religious organizations, and governments might not appear in Publication 78 because they are not required to apply for exemption, but donations to them are deductible.

Under section 170, a donor generally can deduct monetary contributions or donations of property made to a qualified organization, as well as some out-of-pocket expenses the donor incurs when providing services to a qualified organization. Donors who do volunteer work for a qualified organization cannot deduct the value of their time or services. Also, contributions to civic leagues, clubs, labor unions, business leagues, political organizations, or political candidates are not deductible, and neither are the costs of raffle, bingo, or lottery tickets.

If a contribution entitles the donor to merchandise or goods or services, such as admission to a play or sporting event, the donor may deduct only the amount that is above the fair market value of the benefit received. A donor must maintain a written record of any monetary donations the donor makes, such as a bank record or a written statement from the recipient organization. A donor who contributes $250 or more must maintain a contemporaneous written acknowledgment from the donee specifying the amount donated and a description of any property donated.

Tax Analysts has many subject matter experts who can discuss charitable giving. To schedule an interview or a background session, please contact us at communications@taxanalysts.org or 1-800-955-2444.