Donation DetailsSubmitted by Durbin Bennett Tax Advisors on February 4th, 2019
Donating money to our favorite charitable organization is a year-end ritual for many of us. While monthly giving has gained in popularity in recent years, most of us still tend to open up our wallets just a bit wider at the end of the year.
But what about the organization that we’re giving to? What are they required to do once they receive our donation? If you’re unsure, here’s a quick run-down of what you should expect.
For a standard donation, you should expect a receipt. While a charitable organization is not required to provide a receipt to donors unless the donation exceeds $250.00, most organizations do so anyway. Those that do not send a receipt will typically send a donation acknowledgement. In a pinch, donors can always use their cancelled check as a receipt should the organization not provide one.
A valuation of any items you may have received in exchange for your donation. Most receipts from a nonprofit organization typically include a disclaimer that states that you did not receive any goods or services in return for your donation. That means that if you are using your donation as a tax deduction, the amount of your deduction is the amount on the receipt. However, this process changes if in fact you do receive something in exchange for your donation. In that case, the acknowledgement letter must state the value of what was received and the subsequent value of your donation. Keep in mind that if you receive something relatively small in return such as a t-shirt or other small items, this cost is not filtered into the equation and your entire donation will remain tax deductible. However, should you receive something like tickets to a gala, a trip, or other similarly priced gifts, that will have to be acknowledged and factored into your donation total. The IRS has detailed information on their website, should you have any questions regarding this.
Goods and services donated should receive an acknowledgement, but should not include a dollar amount. Goods and services are common donations, and the organization that you are donating to should provide you with an acknowledgement letter that details what the goods and/or services donated were. The main difference between a monetary donation and goods and services is that goods and services donations should not include a dollar value on the acknowledgement or receipt. Assigning a value is the donor’s responsibility. You should also keep in mind that services donated are typically not tax deductible.
Of course, writing a check or donating goods and services isn’t the only way we can give to our favorite organization. Many nonprofits are able to accept alternative options such as donations of stocks and other securities. If you want to donate stocks instead of cash, be sure that you’ve held the stock for at least a year. It’s also important that the donated stock has increased in value, which will ensure that you receive a tax break while supporting the organization. If you do donate stock, the nonprofit should provide you with an acknowledgement or receipt that provides details on the stock given as well as the number of shares, but should not place a value on the stock. If you have additional questions, your financial advisor or CPA should be able to guide you in the right direction.
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