With the increase in the standard deduction under the new tax law, many taxpayers won’t need to complete Schedule A for itemized deductions. For those taxpayers who make charitable contributions and are still able to itemize, the IRS has requirements for what documentation is needed to substantiate the contribution.
In order to take the deduction for cash donations, the taxpayer must have a record of the gift that includes the name of the charitable organization and the date and amount of the contribution. Acceptable documentation would be a bank record or a written communication from the charitable organization. If the taxpayer donates $250 or more to any charitable organization during the tax year, a written acknowledgement of the contribution is required. The acknowledgement from the charity must include the same required information (name of charity and date and amount of contribution). It must also include a statement that no goods or services were received by the donor in exchange for the donation. If goods or services such as a meal were received, the acknowledgement needs to state the value of the goods or services received by the donor.
For property donations under $500 in the tax year, the taxpayer needs to obtain a written acknowledgement from the charity and have a record of the items donated. If the donation is greater than $500 and less than $5,000, besides the written acknowledgement from the charity, the taxpayer must complete and file Form 8283, Noncash Charitable Contributions. Information that is required for each donation:
- Name and address of the charity
- Description of the donated property, including the vehicle identification number if a vehicle is donated
- Date of the contribution
- Date the property was acquired by the donor
- How the donor acquired the property, such as purchased or received as gift
- Cost of the property when it was purchased or received
- Value of the property when it was donated
- Method used to determine the value of the property
For property donations of $5,000 or more, besides the required records listed above, the taxpayer also needs to obtain a qualified appraisal and complete and file Form 8283, Noncash Charitable Contributions. The taxpayer and the qualified appraiser must both sign and date Form 8283. In addition, the charitable organization has to complete an acknowledgement section on Form 8283.
When you keep these items in mind, you can ensure your charitable donations will be documented and recorded properly on your yearly taxes. If you have any questions about charitable donations and taxes, please reach out! I’d love to help.
Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.