Charity Contributions, Gifts As Tax Deduction
Attention: For your 2020 tax return you can have a charitable deduction of up to $300 made during 2020, even if you don't itemize. The gift must go directly to charity in cash rather than to a donor-advised fund or private foundation. Otherwise, you generally need to itemize to take the charitable deduction, which fewer people do since the standard deduction doubled a few years ago. You can enter your $300 charitable deduction when you eFile your return on eFile.com and it will show on line 10b of your Form 1040.
NEW: As a result of the Corona virus Aid Relief and Economic Security Act (CARES Act) the IRS has temporarily suspended the limit on charitable contributions for your 2020 return for taxpayers who take itemized deductions on their tax return. For 2020 they can deduct cash donations to public charities up to 100% of their adjusted gross income - AGI. Cash donations to donor-advised funds and other entities are excluded from the 100% deduction. The amount of charitable cash contributions is still limited to 60% of your AGI. Again this is for tax year 2020 only.
For a taxpayer to take a tax deduction for a charitable contribution there are two deduction methods: itemized deduction and the standard deduction method. A comparison can be found here: compare standard versus itemized deduction.
A standardized deduction is a fixed dollar amount you are entitled to deduct from your AGI based on your personal filing status. With an itemized deduction you list each item you qualify for as a deduction. You can only claim one of these methods: standardized or itemized deduction on your tax return. Which deduction is best for you? The eFile.com tax app will calculate this for you and point out and apply the one deduction method that is most tax-advantageous for you.
In a nutshell, let the eFile.com tax app work for you: start a free return and enter your tax information and the tax app will suggest the right deduction method for you based on your own data, so you get to keep more of your hard earned money.
If you donate to a qualified charity or non-profit organization, you might be able to claim the donation as tax deduction on your tax return. For your 2019 return, the limit on charitable contributions of cash has increased from 50% to 60% of your adjusted gross income or AGI. The easiest way to find out if you can deduct your charitable donations is to start a free tax return on eFile.com. Based on your answers to the tax questions, we will determine whether or not you can claim the tax deduction on the donations you made to charity during the tax year.
Learn more about charitable contributions and your tax return:
Deductible Charitable Contributions
A deductible charitable contribution is a donation or gift made to a qualified organization. The donation must be made voluntarily and with no expectation of any substantial reward or benefit. Generally, you can deduct any cash contributions you make, and you can deduct the fair-market-value of any donated property, such as clothing, household items, or vehicles. You can also claim a deduction for the contribution of stocks.
A cash donation includes money contributed by check, credit card, electronic funds transfer, or payroll deduction. The donation cannot exceed 60% of your Adjusted Gross Income (AGI) in order to qualify as a tax deduction. You must obtain a receipt for any amount of money you donate in order for your contribution to be qualified.
Food, Clothing, and Household Items Donations
You can deduct the fair market value of food, clothing, or household items such as furniture, furnishings, linens, appliances, and electronics. Any donated household item must be new or used but in good condition. There is no fixed method for determining the value of donated items, but if you need guidance, please see IRS Publication 561 - Determining the Value of Donated Property.
Car and Vehicle Donations
You may donate cars, trucks, boats or even planes. The value of your donation will be determined by how the charitable organization uses the vehicle. The organization will provide you with paperwork describing how the vehicle was used and, if it was auctioned, what the selling price was.
A non-profit organization will generally either auction a vehicle, refurbish it and donate it (or sell it to a needy buyer at a vastly reduced price), or make use of it themselves. If your car is sold at auction for over $500, you can deduct the full selling price of the vehicle on your tax return. If your car is auctioned for $500 or less, you can deduct the greater of the selling price or the fair market value. This means you will generally be able to deduct at least $500.
If a car is refurbished and/or repaired, and then given away or sold to a needy buyer, you can generally deduct the fair market value of the vehicle. If the vehicle is used by the organization for other purposes, you may also generally deduct its fair market value.
Donations from IRAs
If you are 70 1/2 or older and have an IRA, you may directly donate a certain amount of your IRA funds tax free to a qualified charitable organization. You may not deduct the value of your time or donated professional services.
Qualified Charitable Organizations
If you intend to deduct your donation, make sure you are donating to a qualified charitable organization. The following organizations generally qualify:
- Religious organizations or places of worship (synagogues, churches, mosques, temples, etc.)
- Federal, state, and local governments (including Indian Tribal Governments)
- Recreation facilities and public parks
- Nonprofit hospitals and health clinics
- Nonprofit schools and other educational organizations
- War veterans' groups
- Service organizations such as United Way, Boy Scouts, Girl Scouts, Boys and Girls Clubs of America, CARE, Red Cross, Salvation Army, etc.
- Organizations dedicated to preventing cruelty to children or animals
- Organizations established to promote literacy
- Scientific organizations
- Other organizations listed in the Internal Revenue Services' online Exempt Organizations Select Check tool (see below)
Before you make your donation, you may want to check with the organization to make sure they are qualified to receive tax deductible donations. You can use the IRS Tax Exempt Organization Search tool to find qualified exempt charitable organizations or organizations with a revoked federal tax-exempt status. Some organizations which may not be listed in the IRS search tool include smaller churches covered under large group exemptions, religious organizations and public charities with annual gross receipts of $5,000 or less, subsidiaries and affiliates of entities listed in the tool, and formally recognized Indian Tribal Governments. You may want to double check the qualified status of smaller charitable organizations before you donate. Many organizations lose their tax-exempt status because they do not file the required documents for three consecutive years. Donations to these organizations are no longer qualified as tax deductible. The IRS keeps an updated list of status revoked organizations on their website.
Organizations That Are NOT Qualified as Charitable
Donations to the following types of organizations are generally not tax deductible:
- For-profit institutions
- Lobbying groups
- Labor unions
- Chambers of commerce
- Civic leagues
- Sports and social clubs
- Most foreign organizations
- Homeowners’ associations
- Value of donated blood
- Political candidates or organizations
- Foreign or unrecognized governments
Transportation Costs and Other Charitable Expenses
You might be able to claim the following expenses as a tax deduction for charity purposes:
- Transportation Expenses: You may also generally deduct the costs of transportation, including using your car to travel to and from the location where you are performing the charitable services. Learn more about travel deductions and mileage rates.
- Out-of-Pocket Expenses: You may generally deduct any out-of-pocket unreimbursed expenses incurred while serving with a qualified charitable organization as a volunteer if the expenses are directly related to the services being performed.
- Expenses for Housing Students: You may generally deduct are any expenses incurred for housing a student sponsored by a qualified charitable organization.
There are restrictions on charitable contributions that relate to documentation and contribution limits. You should keep records of any donations you make, just in case of an IRS audit. The IRS requires you to keep a record of any cash contribution, such as a canceled check, bank statement, credit card statement, or written statement from the charity showing the date of the contribution, the amount of the contribution, and the name of the charitable organization.
If you have made donations by text message, a phone bill will serve as a record of the contribution as long as the bill states the amount, the date on which the contribution was made, and the name of the organization to which you donated.
If the value of a single donation exceeds $250, you must acquire written acknowledgment from the qualified organization. Each contribution counts as a separate itemized deduction.
If your total deduction for non-cash contributions exceeds $500, you must fill out Form 8283 Section A, which eFile.com will do for you. If your contribution of non-cash property exceeds $5,000, you may be required to obtain a third party appraisal of the value. If that is the case, you will also have to fill out Form 8283 Section B. Remember that eFile.com will generate the correct forms for you during your online tax preparation process.
Learn more about the documentation requirements for charitable contributions in Publication 1771 - Charitable Contributions: Substantiation and Disclosure Requirements.
Limits on Charitable Contribution Deductions:
- If you receive some sort of compensation for your donation (such as tickets to a charity ball, a theatrical performance, a sporting event, or merchandise, goods, or services), you can only deduct the amount of the donation that exceeds the fair-market-value of what you received.
- You cannot deduct the cost of raffle, bingo, or lottery tickets purchased from a charitable organization.
- You cannot deduct the value of your donated time or professional services, or the value of donated blood.
- If you make a pledge to donate a certain amount, you can only deduct the amount actually donated during the year.
- If you make a donation by credit card or check near the end of the year, you should still include it on your tax return in the year it was made, even if you do not pay off or balance the account until after the end of the year.
You can only deduct up to 60% of your adjusted gross income in charitable contributions starting in Tax Year 2019. For appreciated assets (including long-term appreciated stocks or property generally deductible at fair market value) your deduction should not exceed 30% of your adjusted gross income. If your contributions exceed your limits, you may carry over the charitable deductions for a period of up to five years.
Other Tax Deductible Contributions
- You can also claim tax deductions on appreciated stocks and contributions to organizations who provide disaster relief.
- Cash and property are not the only things you can donate to charity for a tax benefit. Donations of appreciated stock can provide you with excellent tax savings. You can donate any stock that has risen in value, as long as you have owned it for over a year, and avoid any capital gains tax. If you sold the appreciated stock for cash, you would have to pay tax on the amount of appreciation. If you donate appreciated stock, you can deduct 100% of the value on your tax return.
- Contributions to organizations which provide overseas disaster relief are tax deductible as long as the group in question is based in the U.S. and has full control over the distribution of donated funds. Before contributing, check to make sure the charitable organization is qualified, and be sure to keep a record of the donation. More information about providing charitable donations to disaster relief efforts can be found in IRS Publication 3833 - Disaster Relief.
How To Deduct Charitable Contributions
You must itemize deductions in order to claim a donation made to a qualified organization on your tax return. When you prepare your tax return on eFile.com, we will generate the correct form(s) to use in order to claim your charitable donations based on your answers during the tax interview questions.
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