Deductible charitable contributions for U.S. federal income tax purposes are voluntary donations or gifts made to organizations that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals. You may be able to deduct cash contributions or the value of property you donate, expenses paid for a student living with you, and your out-of-pocket expenses in working as a volunteer. In order to claim a deduction for charitable contributions, you must file Form 1040 and itemize deductions on Schedule A.
In order to be able to claim a tax deduction for a charitable contribution, the contribution must have been made to what the Internal Revenue Service (IRS) has defined as a “qualified organization”. There are many types of organizations that qualify, based on their purpose and the work they do.
Qualified Organizations
Some examples of qualified organizations include:
Churches, mosques, synagogues, temples, and other religious organizations
CARE, Goodwill Industries, Red Cross, Salvation Army, United Way, and other non-profit charitable organizations
Most non-profit educational institutions, including the Boy Scouts, Girl Scouts, Boys and Girls Clubs of America, colleges, museums, and daycare centers available to the general public
Fraternal orders
Veterans organizations
Non-profit hospitals and medical research organizations
Non-profit volunteer fire companies
Public parks and recreation facilities
Civil defense organizations
Federal, state, and local governments, if the gifts are solely for public purposes.
Checking an Organization’s Status
If you have any question as to whether a contribution is deductible, you can check with the organization itself. They should be able to provide you with verification of their charitable status. In order to become qualified, an organization must apply to the Internal Revenue Service. The IRS maintains a list of qualified organizations, which can be found in its Publication 78. A printed version may be available in public libraries, or there is a search tool available on the Internal Revenue Service website.
Contributions You Can Deduct
In general, you can deduct donations or gifts in cash or property that you make to a qualified charitable organization. If you give property, you can normally deduct the property’s fair market value at the time of the donation. There are limits (described below) that apply in the case of certain types of property. You can also deduct certain out-of-pocket expenses in performing volunteer work, and you may be able to deduct a certain amount of expenses you incur if you have a student living with you.
Cash Contributions
You can claim a deduction for cash donations made to qualified organizations. If the amount of your individual donation is less than $250, keep records of your payments to support the deduction. In figuring whether a gift is $250 or more, do not combine separate donations, even if they are to the same charitable organization.
Donations of $250 or more require a statement from the charitable organization showing the amount contributed, and whether the organization gave you any goods and services in return for your contribution. If you did receive any goods or services, a description and estimate of the value must be included.
Contributions From Which You Receive Some Benefit
If you made a contribution and received some type of benefit in return, such as food, entertainment, or merchandise, generally you can only deduct the amount of your contribution that is more than the value of the benefit. For example, the amount you can deduct for charity benefit events is the excess of the amount you pay over the value of the meal, show, sporting event, or other privileges or benefits you receive.
If you pay a membership fee or dues to a qualified organization and the annual payment is $75 or less, you can disregard any benefits you receive. You can pay more than $75 if the organization does not require it to get the same benefits. These benefits include free or discounted admission to the organization’s facilities or events, preferred access or discounts on goods and services, and admission to events that are only open to members. You can also deduct your entire contribution if you receive benefits of token value in return.
Contributions of Property
Fair Market Value
You can generally deduct the fair market value of donations of property. You may be able to determine the fair market value of used clothing and other used items by checking the prices for comparable items in used clothing stores or outlets, or consignment or thrift shops. Newspaper ads, or online auctions may be a source of information on the value of used furniture, equipment, and other items. The fair market value of more valuable items, such as paintings, antiques and objects of art, should be supported by an appraisal. If you donate a vehicle, you may be able to use the blue book value, taking into consideration the condition of your vehicle.
Property that has Decreased in Value
If the value of the property that you donate has decreased and is less than your cost or other basis in the property, your charitable contribution deduction is limited to the fair market value at the time of the donation. You cannot claim a deduction for the loss in value.
Property that has Increased in Value
If the value of the property has increased and is more than your cost or basis, you may have to reduce the fair market value of the property by the amount of appreciation when you calculate your charitable contribution deduction. Different rules apply, depending on whether the property is considered to be ordinary income property or capital gain property.
Ordinary Income Property
Property is considered to be ordinary income property if its sale at fair market value would result in ordinary income or short-term capital gain for tax purposes. This category includes inventory, works of art created by the donor, and capital assets held one year or less. The amount you can deduct as a charitable contribution would be the fair market value less any gain you would realize if you sold the property. In other words, your deductible contribution would be your basis in the property.
Capital Gain Property
This is property that would result in a capital gain if you were to sell it at its fair market value. Capital gain property includes capital assets held more than one year, such as stocks, bonds, jewelry, coin or stamp collections, cars, and furniture. It also includes real property and depreciable property used in your trade or business.
The general rule is that your charitable deduction for a gift of capital gain property is the fair market value. If the following exceptions apply, you would have to reduce the fair market value by any capital gain you would realize on a sale:
You contribute the property to private non-operating foundations, that do not qualify for the 50% limit (the limit on your contributions as a percentage of adjusted gross income, that applies to most charitable organizations).
You contribute tangible personal property that is put to a different use by the charity.
You choose the 50% limit instead of the 30% limit. (These limits are described below.)
Donation of a Vehicle
If you donate a vehicle, the amount of your deduction depends on what the charitable organization does with the vehicle.
If the charity turns it over to a dealer who auctions off the vehicle, you can only deduct the amount of the proceeds from the auction. By law, the charity has to send you an acknowledgment of this transaction within 30 days.
If the charity makes a "significant intervening use" of the vehicle in its charitable work, or gives it to a beneficiary, or sells it to a needy individual at a price that is significantly below the market price, you can deduct the fair market value.
You should receive a certification from the charitable organization within 30 days. You should keep a record of the car — make, model, year, mileage, and a photo showing its condition, if possible, as support for the amount you are deducting.
Deductible Charitable Expenses
Student Living With You
If you have a foreign or American student living with you, you may be able to take a charitable deduction for some of the expenses you incur. You must have a written agreement with a qualified organization to have the student live in your home in order to provide the student with educational opportunities, the student must not be your dependent, and the student must be attending class full-time in any grade up to the 12th grade in the United States. You can deduct up to $50 per month of qualifying expenses for each full calendar month the student lives with you. Qualifying expenses include the cost of books, tuition, food, clothing, transportation, medical and dental care, entertainment, and other amounts you actually spend for the student’s well-being. But if you have a student living with you under a mutual exchange program, in which your child will live with a family in a foreign country, you cannot take a deduction.
Out-of-Pocket Expenses
You can deduct your out-of-pocket expenses for services you provide on a volunteer basis. Some examples include the cost of buying and cleaning uniforms, travel expenses while you are away from home performing services for a qualified organization, and the cost of using your personal vehicle in your volunteer work.
You can claim a deduction for travel expenses away from home if there is “no significant element of personal pleasure, recreation, or vacation in the travel”. You will need to weigh the circumstances in each trip, and you may need to separate out any expenses that are purely person. The travel expenses you can take as a charitable deduction include air, rail, and bus transportation; out-of-pocket expenses for your car (see below); taxis and public transportation fares; lodging and meals. Since the travel is for charitable purposes and not for business, the expenses are not subject to the limits for business-related expenses.
If you use your own vehicle to drive to and from the volunteer work, you can take a deduction for your actual expenses for gas and oil, or you can take the standard mileage rate. Under either method, you can add parking and tolls to the amount you claim.
You cannot deduct the value of your services or your time while you are performing volunteer work.
Contributions You May Not Deduct
You cannot deduct the following as charitable contributions:
A contribution to a specific individual, even if the person is needy or worthy. In order to be deductible, the contribution must be through a qualified organization to persons who are needy or worthy.
A contribution to a non-qualified organization, such as civic leagues, social and sports clubs, labor unions, and chambers of commerce.
Political contributions.
Contributions to lobbying groups.
Gifts to foreign organizations. But you may be able to deduct gifts to certain U.S. organizations that transfer funds to foreign charities and certain Canadian, Israeli, and Mexican charities.
Cost of tuition.
Raffle, bingo, or lottery tickets.
Your personal expenses, such as the cost of meals while performing volunteer services.
Value of your time or services.
Appraisal fees to determine the fair market value of donated property. These may be claimed as miscellaneous itemized deductions, subject to the 2% of adjusted gross income limit.
Contributions of partial interests in properties.
Limits on Deductions
The total amount of contributions you can deduct in a year is generally limited to 50% of your adjusted gross income. But in some cases 20% and 30% limits may apply, depending on the type of property you give and the type of organization you give it to.
A qualified organization may be qualified with a 50% limitation or a 30% limitation. For example, certain veteran’s organizations, fraternal societies, and private foundations may be subject to a 30% limit for deductions. This can also be found in Publication 78 on the IRS website. Gifts that are for the use of any organization are also subject to this 30% limit. There is a separate 30% limit on gifts of capital gain property to a 50% limit organization. This limit applies unless you choose to reduce your contribution for the appreciation in the property’s value.
There is another 20% limit on gifts of capital gain property to or for the use of any organization, other than those that qualify for the 30% limit (gifts of capital gain property to 50% limit organizations).
Applying the Limits
Generally, if your total contributions for the year are less than 20% of your adjusted gross income, you do not need to be concerned with the limits. But if your total contributions are more than that amount, you will need to apply the limits in a certain order, to determine the amount you can deduct as charitable contributions. You may want to use the “Worksheet for Limit on Deductions” in IRS Publication 526, Charitable Contributions, to guide you through the calculation.
Recordkeeping
You should keep records of your cash and non-cash contributions to support the amount you deduct. There are specific requirements for supporting documentation, generally depending on the amount of the contribution.
Cash Contributions
If you made cash donations, you should keep canceled checks, receipts, or other reliable written records showing the name of the organization and the date and amount given. As mentioned above, if you make a payment of more than $75, that is partly a donation and partly for goods or services, the organization should send you a statement indicating the value of the benefits you received.
If you make a contribution of $250 or more, you need a written acknowledgement from the charitable organization, or payroll deduction records, if the contribution was deducted from your pay.
Noncash Contributions
If you gave property, you should keep a receipt or written statement from the organization you gave the property to, or a reliable written record, that shows the organization's name and address, the date and location of the gift, and a description of the property. For each gift of property, you should also keep reliable written records that include:
How you figured the property's value at the time you gave it. If the value was determined by an appraisal, keep a signed copy of the appraisal.
The cost or other basis of the property, if you must reduce it by any ordinary income or capital gain that would have resulted if the property had been sold at its fair market value.
How you figured your deduction for gifts of capital gain property.
Any conditions attached to the gift.
Expenses
You should keep records of your actual expenses or a log of your mileage, if you are deducting expenses for the use of your personal vehicle in performing volunteer services. You should note the name of the organization, the date, and your actual expenses or mileage.
If you have other out-of-pocket expenses related to your work, including travel expenses, you should keep receipts and evidence of payment, and should get an acknowledgement of your services from the qualified organization.
How To Report
Charitable contributions are reported as itemized deductions on Schedule A of Form 1040. If the total of all your noncash contributions is $500 or more, you will have to complete Section A of Form 8283, Noncash Charitable Contributions. If you claim a deduction of $5,000 for one item or group of items, you will need to complete Section B of that form.
If you claim a deduction for expenses you incur for a student living with you, you must submit with your return a copy of the agreement with the sponsoring institution, a summary of the items you paid, and a statement showing the date the student became a member of your household, the dates of his or her full-time attendance at school, and the name and location of the school.
Other documentation supporting your charitable deductions does not need to be filed with your return, but should be kept for your records.