Written by Kiley Wiechman, CPA, Manager
Taxpayers are allowed an itemized deduction for amounts contributed to qualified charities. However, donors must educate themselves on the documentation requirements related to their charitable contributions as inadequate documentation will result in a loss of the deduction. And in some cases, non-profits could be assessed penalties for documentation errors.
Obtaining written acknowledgement
Contributions of $250 or more require written acknowledgement from the charity. The acknowledgement must indicate:
- The amount of cash or a description of property contributed
- Whether the charity provided any goods or services in consideration for the contribution (“quid pro quo” statement) or if not, must state “no goods or services were received”
Written acknowledgement must be obtained by the date the tax return is filed or the due date of the return, whichever is earlier. There is no latitude in obtaining the acknowledgement. Failure to obtain a proper and timely receipt will result in a loss of the deduction.
Quid Pro Quo contributions
If a contribution exceeds $75 and the non-profit organization provided goods or services the organization must provide a written statement which:
- Informs the donor that the deduction is limited to the excess of the value of the contribution over the value of the goods or services received
- Provides the donor with a good faith estimate of the value of the goods or services
Goods or services that have an insubstantial value or intangible religious benefit, or certain membership benefits received for an annual payment of $75 or less are disregarded for the purposes of the quid pro quo rules.
Contributions of property
Taxpayers are allowed a deduction for the fair market value of property contributed to a qualified charity.
If the property is valued at more than $5,000, taxpayers must obtain a qualified written appraisal. A Form 8283, Noncash Charitable Contributions, must be signed by the appraiser and the charity and attached to the donor’s tax return. This does not apply to publicly-traded securities.
Contributions of a partial interest in property are generally not allowed, with the exception of qualified conservation easements.
If a non-profit organization sells or exchanges contributed property where the value exceeded $5,000 within three years of receipt from a donor, the organization must file Form 8282, Donee Information Return within 125 days of disposition of the property. This does not apply to publicly-traded securities.
Contributions of motor vehicles, boats, and airplanes
The general receipt rules do not apply to contributions of qualified vehicles valued at more than $500. Acknowledgement must be provided by the non-profit organization using Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes. The organization must provide the acknowledgement to the donor within 30 days of the sale of the vehicle, or within 30 days of the contribution, if there is not sale.
- If the vehicle was sold by the non-profit to an unrelated party, the Form 1098-C must state the gross sales proceeds and the donor’s deduction may not exceed those proceeds.
- If the vehicle is not sold, the acknowledgement must state the organization’s intended use and that the vehicle will not be sold or exchanged before completion of such use.