Give and Get: Tax Deductions for Cash Donations

November 23, 2015 : Ashlee Crowl

As this is the time of year for giving, we wanted to break down the tax benefits associated with common charitable donations. This is the first in a series of three posts.

The National Center for Charitable Statistics (NCCS) calls the last few months of the year “The Giving Season.” It seems that during the holidays, we often feel more generous and are encouraged to give more. In addition to being philanthropic, this charitable giving also has a tax benefit, through taking charitable deductions. The IRS reported charitable deductions amounted to $194.6 billion in 2013.

What is one of the easiest things to donate and accepted everywhere? Cash. Cash donations include payments made in the form of cash, check, credit card, debit card or payroll deduction. Here are the details of the amount you can deduct and how.

First: It Must Go to a Charitable Organization

You can only deduct amounts given to qualified organizations. We covered what kinds of donations are qualified in an infographic. (link to come.) You can always check the IRS website if you aren’t sure whether the organization is qualified for charitable donation purposes.

Documentation Required

You will need some kind of record to prove that you did make a cash donation to a charitable organization in order to claim the deduction.

If the annual amount donated is less than $250, a bank record, receipt or acknowledgement letter from the organization that you made the donation to will suffice.

Bank records may include a bank statement, an electronic funds transfer receipt, a cancelled check, or a credit card statement.

If the donation is more than $250, you will need a written acknowledgement from the organization.

If you use documentation from the receiving organization there are some requirements. The document must state:

  • The amount contributed
  • Whether you received any services or goods in exchange for the donation (think tickets to an event where part of the ticket is a donation and part of it is for the meal you receive)
  • A description and reasonable estimation of the value of any goods or services received
  • If the goods or services were intangible religious benefits, like attending a religious ceremony. This does not including religious education.

If you make the donation through a payroll deduction, you can use a pay stub, a W-2 Form, other document from the employer that shows the amount or a pledge card or document from the organization. That statement should describe that the organization did not provide any goods or services in exchange for the donation.

You can deduct a gift of $250 or more if you have a statement from the organization. However, if you did receive any goods or services, a description and estimate of the value must be included. If you received only intangible religious benefits the organization must state this, but it does not have to describe or value the benefit. For these donations, the acknowledgement must include the same information as described above and must be received by the date the return is filed including extensions.

When you set out to determine whether you have any donations that were over $250, it is important to note that each donation is considered separately. For example, if you donate $30 to your church every Sunday, each $30 contribution can be considered separately as multiple $30 donations rather than aggregating them to reach one total.

Deduction Limitations

While your generosity may know no limits, your available donations do. There are limitations for charitable deductions also. Deductions for charitable cash contributions cannot be more than 50% of your adjusted gross income. Charitable contributions are only deductible if you itemize deductions on Schedule A of your 1040 rather than taking the standard deduction.

Keep following Block Talk for more information on donating property, unusual items and your time to charitable organizations.

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Ashlee Crowl

Ashlee Crowl

Contributor, The Tax Institute