If you itemize your deductions, you can claim donations you make to qualified charitable organizations. This can reduce your taxable income. Claim charitable donations on Form 1040, Schedule A. Your donations must go to 1 of these IRS-certified qualified organizations to be deductible:

• Nonprofit religious group
• Nonprofit educational group
• Nonprofit charitable group

These groups are often referred to as 501(c)(3) organizations. Donations made directly to needy individuals don't count as charitable donations.

Money Donations

Money donations are donations made directly to a nonprofit organization using 1 of these payment methods:

• Cash
• Check
• Credit card
• Debit card
• Payroll deduction
• Automatic withdrawals from your bank account

If you accept something in return for your gift, you can't write off the full amount. 

Ex: A local public television station offers a CD player for a $1,000 donation to its annual fund drive. If the CD player’s value is $200, your deduction is limited to $800 -- the difference between what you gave and what you got. You can claim the full charitable deduction only if you refused the CD player.

The donor can disregard goods and services received if (for 2012) 1 of these applies:

• Their fair market value isn’t more than the lesser of :
  • 2% of the payment 
  • $99
• Both of these are true:
  • The payment is at least $50 for 2012.
  • The only benefits received are token items bearing the organization’s logo, like mugs and T-shirts, with an aggregate cost of no more than $9.90  for 2012.
• The organization gives out free, unordered items with a donation request.
• Both of these are true:
• The annual payment is $75 or less.
• The donor receives certain rights and privileges, like discounted admission to performances. Discounted tickets to athletic events aren’t included in this exception.

If you're not sure if the organization you're donating to is IRS-approved, ask for the organization’s tax ID number. Then, check www.irs.gov for a list of qualified tax-exempt organizations.
 

Recordkeeping Requirements

The recordkeeping requirements for donations differ depending on:

• Type of donation
• Amount of the donation

Cash donations of less than $250

To deduct a cash donation, regardless of the amount, you must prove the donation amount with 1 of these:

• Receipt
• Bank or credit union statements
• Canceled checks
• Credit card statements

Bank records must show:

• Organization’s name
• Date
• Donation amount

Written records from the donor aren’t enough to support charitable donations. Such records include check registers or personal notations.

For donations made by payroll deduction, you can prove your donations if you have both of these:

• Document your employer furnishes showing the amount withheld, like a pay stub or W-2
• Pledge card or other document from the organization stating it doesn't provide goods or services for donations made by payroll deduction

Cash donations of $250 or more

You can claim these donations if the qualified organization gives you a written acknowledgment of the donation. It must include all of these:

• Amount of cash contributed
• Statement showing if the organization gave goods or services for the donation. This doesn't include token items or membership.
• Description and good faith estimate of the value of goods and services described in the second bullet

You must receive this acknowledgment by the earlier of the:

• Date you file your return for the year you made the donation
• Due date, including extensions, for filing your return

Noncash donations of less than $250

The organization must give a receipt showing:

• Organization’s name and address
• Date and location of donation
• Reasonably detailed description of the property donated

However, you don’t have to get a receipt if it’s impossible or impractical, like when property is donated at an unattended drop-off site. In these cases, you must keep a reliable written record for each donated item showing:

• Organization’s name and address
• Date and location of donation
• Reasonably detailed description of the property donated
• Fair market value of the donation at the time of donation with explanation telling how you figured the fair market value
• Cost or other basis you had in the donation if you must reduce the fair market value by appreciation. The record must also show the amount of the reduction and how you figured it.
• You might be contributing less than the entire interest in the donation. If so, you must show the amount you’re claiming as a deduction for the year as a result of the donation.
• If the other portion of the interest has been donated, you must provide details of each donation of the other interests.
• Terms and conditions attached to the donation

Noncash donations at least $250 but less than $500

You must get and keep a written receipt or acknowledgment from the organization for these donations. You must get the receipt before or on the later of:

• Your filing date 
• The due date of the return, including extensions

The written receipt must include:

• Description of donation
• Indication of goods or services you received, if any, other than certain token items or membership benefits
• Description and good faith estimate of the value of goods or services you received. This applies unless the only benefit received was an intangible religious benefit (Ex: admission to a religious ceremony)

The organization can give a separate statement for each donation or periodic statements proving your donations.

To learn more, see IRS Publication 1771: Charitable Contributions.

Noncash donations of more than $500 but less than $5,000

You must have a written acknowledgment and written record, which includes:

• How you acquired the donated property -- like purchase, gift, or inheritance
• Approximate date you acquired donated property -- or approximate date you substantially completed donated property if it was:
  • Created
  • Produced
  • Manufactured
• Cost or other basis, and adjustments to the basis, of property held less than 12 months. If available, include the cost or other basis of property held 12 months or more. This requirement doesn’t apply to publicly traded securities.

Noncash donations of $5,000 or more

If you make a noncash single charitable donation, for 1 item or a group of similar items, that’s more than $5,000 :

• The organization must give you a written acknowledgment.
• You must keep the records required under the rules for donations of more than $500 but less than $5,000 .

When you figure if a deduction is more than $5,000 , you must do so in a certain way. You must combine all deductions for similar items donated to all organizations in the year. An appraisal is usually also required.

Appraisals

When the value of your donation is more than a certain limit, you must get a qualified written appraisal from a qualified appraiser. Appraisals are required when the value of:

• A single donated item or a group of similar items is more than $5,000 .
• Stock not traded publicly is $10,000 or more. Publicly traded securities don't require a written appraisal.

You’re also required to get an appraisal for an item of clothing or a household item if either of these is true:

• The item is valued at more than $500 .
• It isn’t in good condition.

Ex: Melissa donates a marble-topped table to a charity. The table is badly damaged and can’t be used without extensive repairs. An appraiser determines the quality of the marble and the table’s other features and gives it a value of $650.

To evaluate the specific kind of donated property, the qualified appraiser must possess the needed:

• Education
• Credentials
• Experience 

The IRS imposes a substantial penalty if the donated property’s value is significantly overstated. The cost of the required appraisal can't be part of your charitable donation. Instead, you can deduct it as a miscellaneous itemized expense.

To learn more, see Appraisals in IRS Publication 561: Determining the Value of Donated Property.

Appreciated Property

The tax-saving potential can be much greater when you donate appreciated property like:

• Stocks
• Real estate
• Art
• Antiques

However, the rules are more complicated. Your deduction depends partly on if the property you donated is considered capital-gain or ordinary-income property.

To learn more, see IRS Publication 526: Charitable Contributions.

Item Donations

Donating property can earn you a deduction just as donating money can. Property donations are usually used clothing and household goods. Your write-off for these is the fair market value of the property at the time you give it.

Item donations must be in good used condition to qualify for a deduction. "Good used condition" isn’t defined. However, only deduct donations the organization plans to sell or to use for its charitable purposes. If an item is heavily worn, ask the organization if it will sell or use the item.

It’s often difficult to determine the fair market value of used items. Even the IRS has no stated amounts considered acceptable for these items. However, the Salvation Army publishes a guide providing the average prices of clothing, furniture, and household items in its stores. You can use this guide to establish the value of these items.

To learn more, see IRS Publication 561: Determining the Value of Donated Property.

When you donate a vehicle to a charity, special rules apply. If the charity sells the vehicle, the charity must send you a Form 1098-C within 30 days of the sale telling you the sales price. This sets the amount you can deduct on your return.

However, there's 1 exception. If the claimed car’s value is $500 or less, you can deduct the value of the donated vehicle. You’ll still deduct the vehicle's fair market value at the time of the donation if the charity:

• Makes substantial improvements to the car
• Fixes up the car and sells it
• Gives it to a needy person
• Uses it in its charitable efforts

To learn more, see IRS Publication 526: Charitable Contributions.

Out-of-Pocket Expenses

You can also deduct expenses for doing volunteer work for a qualified organization.

You can deduct:

• Mileage expenses if you use your car while doing volunteer work for a hospital or school
• Mileage expenses for miles you drive to and from a charity to drop-off donated goods
• Parking fees, tolls, or public transportation expenses while doing volunteer work or dropping off donated goods
• The mileage rate for 2012 is 14 cents a mile.

You can also deduct the cost and care of a special uniform you're required to wear while performing services for the organization. Ex: If you're a scoutmaster, you can deduct:

• Cost and upkeep of your scout uniform and associated items needed
• Materials and supplies you pay for and use your volunteer efforts, like stationery and stamps

You can't write off the value of services or time you donate. 

Ex: You're a carpenter who usually charges $45 an hour, and you spend 20 hours helping to build a wing on your church. You can't deduct $900, or any other amount, for your time. Under the tax law, only a completed transfer of money or a full interest in property qualifies for the deduction.

If you're a foster parent, you can deduct as a charitable donation some of the cost of providing for your foster children. You can deduct the cost that’s more than the reimbursement you receive -- if you aren’t in the trade or business of providing foster care.

You can also earn a charitable deduction if a student lives in your home under a program sponsored by a qualified organization. To qualify for this deduction, the student:

• Can be American or foreign
• Must be a full-time elementary or high school student

You can deduct up to $50 a month of what you spend for the student, including the cost of:

• Books
• Tuition
• Food
• Clothing
• Entertainment

You’ll need to count each month the student lives with you for 15 or more days to figure how many $50 allotments you can claim.

Form 8283: Noncash Charitable Contributions

You must file Form 8283: Noncash Charitable Contributions if both of these apply:

• You claimed a deduction for donated property.
• The property has a total aggregate value of more than $500 for the year. This doesn't mean a per-item value.

The information Form 8283 requires is basically the same as what you need to prove a charitable gift -- what you gave, when, and to whom. For each item valued at more than $500 each, you must also specify:

• When and how you acquired the item
• Item’s cost or adjusted basis

Ex: Kora made 3 trips during the year to the Salvation Army to drop off some small household items and a few bags of clothing. The value of the items she dropped off during each trip was $131, $155, and $97, respectively. Since the donations’ total amount ($383) is less than $500 , she doesn’t need to file Form 8283.

However, if she also donated $175 in goods to Goodwill Industries, she can add this donation’s value to the value of her Salvation Army donation ($383). Since her total would be more than $500 , she must file Form 8283.

Charitable Deduction Limits

Your deductions can't be more than 50% of your adjusted gross income (AGI) if the donations are to:

• Public charities
• Colleges
• Religious organizations

Within that overall limit, gifts of appreciated property can't total more than 30% of your AGI. Appreciated property is property that’s increased in value since you originally acquired it.

Donations to certain organizations, like veterans' groups, can't be more than either:

• 30% of your AGI
• 20% of your AGI on gifts of certain appreciated property

To learn more, see IRS Publication 526: Charitable Contributions.