To be deductible, charitable contributions must be made to qualified organizations. Qualified organizations include, but are not limited to, federal, state, and local governments and organizations organized and operated only for charitable, religious, educational, scientific, or literary purposes, or for the prevention of cruelty to children or animals. Organizations can tell you if they are qualified and if donations to them are deductible.
If your contribution entitles you to merchandise, goods, or services– including admission to a charity ball, banquet, theatrical performance, or sporting event– you can deduct only the amount that exceeds the fair market value of the benefit received.
For a contribution of $250 or more, you can claim a deduction only if you obtain a written acknowledgment from the qualified organization. The written acknowledgment required to substantiate a charitable contribution of $250 or more must contain the following information:
- Name of the organization;
- Amount of cash contribution;
- Description (but not value) of non-cash contribution;
- Statement that no goods or services were provided by the organization, if that is the case;
- Description and good faith estimate of the value of goods or services, if any, that organization provided in return for the contribution; and
- Statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible religious benefits, if that was the case.
Generally, you can deduct your cash contributions as well as the fair market value of any property you donate to qualified organizations. The fair market value of most household or personal items is generally much less than the price paid when new. You should claim only what the item would sell for at a garage sale, a flea market, or a second hand or thrift store. You must fill out Section A of Form 8283 (PDF) if your total deduction for all noncash contributions is more than $500. If you make a contribution of noncash property worth more than $5,000, generally an appraisal must be done. In that case, you must also fill out Section B of Form 8283. Attach Form 8283 to your return. For more information on this requirement, refer to Publication 526.
Generally, if property you contribute increased in value while you owned it, you may not be able to deduct its full value. Refer to Publication 526. You may have to make an additional computation which includes the property’s cost to determine the deductible amount of your contribution.
Contributions you cannot deduct at all include contributions made to specific individuals, political organizations and candidates, the value of your time or services and the cost of raffles, bingo, or other games of chance. You cannot deduct contributions that you give to qualified organizations if, as a result, you receive or expect to receive a financial or economic benefit equal to the contribution.
Quid Pro Quo Donations:This is a payment a donor makes to a charity partly as a contribution and partly for goods or services. For example, if a donor gives a charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. In this example, the charitable contribution part of the payment is $60. Even though the deductible part of the payment is not more than $75, a disclosure statement must be filed because the donor’s payment (quid pro quo contribution) is more than $75. Failure to make the required disclosure may result in a penalty to the organization.
Nonprofit Disclosure Statement
The required written disclosure statement must:
- Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of any money (and the value of any property other than money) contributed by the donor over the fair market value of goods or services provided by the charity, and
- Provide the donor with a good faith estimate of the fair market value of the goods or services that the donor received. The charity must furnish the statement in connection with either the solicitation or the receipt of the quid pro quo contribution. If the disclosure statement is furnished in connection with a particular solicitation, it is not necessary for the organization to provide another statement when it actually receives the contribution.
No disclosure statement is required if any of the following is true:
i. The goods or services given to a donor have insubstantial value as described in Revenue Procedures 90-12 and 92-49,
ii. There is no donative element involved in a particular transaction with a charity (for example, there is generally no donative element involved in a visitor’s purchase from a museum gift shop).
iii. There is only an intangible religious benefit provided to the donor. The intangible religious benefit must be provided to the donor by an organization organized exclusively for religious purposes, and must be of a type that generally is not sold in a commercial transaction outside the donative context. For example, a donor who, for a payment, is granted admission to a religious ceremony for which there is no admission charge is provided an intangible religious benefit. A donor is not provided intangible religious benefits for payments made for tuition for education leading to a recognized degree, travel services, or consumer goods.
iv. The donor makes a payment of $75 or less per year and receives only annual membership benefits that consist of:
- Any rights or privileges (other than the right to purchase tickets for college athletic events) that the taxpayer can exercise often during the membership period, such as free or discounted admissions or parking or preferred access to goods or services, or
- Admission to events that are open only to members and the cost per person of which is within the limits for low-cost articles described in Revenue Procedures 90-12 and 92-49 (as adjusted for inflation). Also see the discussion of insubstantial value above.
Learn more about Determining the Value of Donated Property (Publication 561) here.