This article originally appeared as a column for the Cleveland Jewish News.
Tax day is just around the corner, again. Whether you hire an accountant or prepare your own returns using one of the many available software programs, or even if you do it by hand, if you itemize your deductions you will want to compile a list of your charitable contributions.
In determining whether your contributions will be deductible, the following general principles apply:
- The donation must be to a qualified organization. Donations to political organizations and candidates will not be deductible, nor will donations to specific individuals. The Internal Revenue Service has prepared IRS Publication 526, Charitable Contributions, which outlines its rules on how to determine what constitutes a qualified organization. Note that if you are donating by cash or check, the donation must have cleared within the calendar year. If you made your donation late in December, you will want to double-check when it was deducted from your account.
- Donations of property are generally deductible at the property’s fair market value. If you are donating smaller value items such canned goods for a food bank, toys for a charity toy drive, or household goods or clothing for a charity resale shop, your estimation of the reasonable fair market value, or a store receipt showing the purchase price, will likely suffice. However if you are donating an asset such as a vehicle, a piece of artwork, or anything else with significant value, you will want to consult with a professional to determine if you will need a certified appraisal of the item and to ensure that your donation will pass muster with the IRS.
- If you have received something of value in exchange for your contribution, that value will have to be subtracted from the donation. So if, for example, you pay $500 for a ticket to a charity gala and receive dinner and entertainment worth $100 in return, you will likely be able to write off only $400 of the ticket amount. But if your $500 bid on a silent auction gets you a weekend getaway worth $1,000, you won’t be able to claim any of it because you received an item worth more than what you have paid.
- Donations to that work colleague’s walk/5K/jump-rope contest or other such charitable fundraiser are generally deductible. Make sure you get a receipt for your donation; often the organization will permit online donations via credit card, which will simplify your record keeping.
- Volunteer efforts are not deductible in terms of time spent, even if you are volunteering services – legal or medical, for example, that you would normally bill for. However, if you have incurred out-of-pocket expenses related to your volunteer work, you may be able to deduct that.
If you are trying to “go it alone” in your tax preparation, you will want to make sure you consult the available literature from the Internal Revenue Service at irs.gov. But if your charitable donations were significant enough to make an appreciable difference in your tax burden, consider enlisting professional assistance to help avoid an audit and to ensure you are taking advantage of all available deductions. And most importantly, document, document, document. Photographs of donated items, canceled checks, receipts and letters of acknowledgement from the charitable organization will help keep you compliant, not only in terms of preparation, but also in terms of substantiating the donation in the event a deduction is ever questioned.
*Andrew Zashin writes about law for the Cleveland Jewish News. He is a co-managing partner with Zashin & Rich, with offices in Cleveland and Columbus.