All Donations Are Not Created EqualSubmitted by Durbin Bennett Tax Advisors on December 5th, 2018
Giving money to philanthropic causes is important to many of us. Year end giving in particular is popular with both donors and charitable organizations. The most common way to give money for most people is to simply write a check or put a donation on a credit card. The charity then typically sends us a receipt for our donation, and everyone is happy.
Not so fast.
What about if we give a donation over $250.00?
Up to $250.00, a nonprofit has the option to send you a receipt. But if you make a donation over $250.00, you are then responsible for obtaining proof of that donation should you take a tax deduction for the contribution. The proof can be a receipt from the organization or a cancelled check, but you’ll need to have something in writing substantiating the donation.
What about if we receive something in return for our donation?
Organizations that provide a receipt should also acknowledge that the donor did not receive any goods or services in exchange for their donation – if that is the case. If a donor does receive something in return for their donation, there are strict IRS guidelines that need to be followed, depending on the amount of the donation and the value of any items received.
What about if I donate goods or services?
Donations of goods and services or in-kind donations, are an acceptable form of giving in the eyes of the IRS, but there are some things you should be aware of. When you make an in-kind donation, the charity that you are donating to should acknowledge that donation the same way that they would acknowledge a cash gift, with one major exception; the charity does not include the value of the in-kind donation on the acknowledgement letter. A gift acknowledgement letter for an in-kind donation will include a description of the donation, the statement that no goods or services were provided in return for the contribution, or a description of any goods or services provided in return for the contribution. It’s up to you, the donor, to assign a value to the donation if you take it as a deduction at year end. As for a donation of your services, typically services are not deductible.
What if I donate stock?
Donating stock is common at year-end and is tax-deductible, but it’s important to remember that the stock must have been held by you for a year in order for the donation to be tax-deductible. It’s important to remember that you only want to donate stock that has gone up in value, as you’ll receive a substantial tax break, while also supporting a cause that is important to you. However, if you’re holding stock that has gone down in value, it’s better to sell the stock and donate the proceeds to the organization then it is to donate the reduced value stock. In exchange for your donation, you should receive the typical receipt that indicated the stock and the number of shares, but not the value of the stock itself.
What if I have more questions?
If this is all confusing to you, check with your CPA or financial planner for more details, or check out the IRS website that provides a detailed explanation of charitable giving.
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