Taxpayers must generally provide documentation to support (or to “substantiate”) a claim for any contributions made to charity that they are planning to deduct from their income. Assuming that the contribution was made to a qualified organization, that the taxpayer has received either no benefit from the contribution or a benefit that was less than the value of the contribution, and that the taxpayer otherwise met the requirements for a qualified contribution, then taxpayers should worry next whether they have the proper records to prove their claim.
The taxpayer must provide records to prove a donation of any amount of cash (including payments by cash, check, electronic funds transfer or debit and credit card). Acceptable records for cash donations of less than $250 generally include:
Caution: A taxpayer cannot substantiate deductions through written records it has prepared on its own behalf, such as a checkbook or personal notes.
If a taxpayer donated $250 or more in cash at any one time, the taxpayer must provide a contemporaneous written acknowledgment of the donation from the qualified organization. For each donation of $250 or more, the taxpayer must obtain a separate written acknowledgment. Furthermore, this written acknowledgement must:
Note: The written acknowledgment ideally would also show the date of the contribution. If it does not, the taxpayer must also provide a bank record that indicates the date.
The acknowledgment must contain a statement of whether or not a taxpayer received any goods or services as a result of the donation, even if no goods or services were received. Even if the donation was for tithes to a religious organization, such as a church, synagogue or mosque, the acknowledgment should state that the only goods and services received were of intangible religious value. The Tax Court has upheld the disallowance of charitable contribution deductions in which the written acknowledgment omitted such a statement regarding goods or services provided.
As with cash contributions, the requirements for substantiating non-cash contributions increase with the value of the contribution. For example, to substantiate non-cash contributions of less than $250, taxpayers must show a receipt or other written communication from the charitable organizations.
To substantiate a non-cash contribution between $250 and $500, the taxpayer must obtain a written acknowledgment of the contribution from the qualified organization prior to the earlier of the filing date or due date of its return. The acknowledgment must also describe the type and value of the goods and services, if any, provided to the taxpayer as a result of the donation.
To substantiate non-cash contributions totaling between $500 and $5,000 or donations of publicly traded securities, a taxpayer must complete Section A of Form 8283, Noncash Charitable Contributions. To substantiate non-cash contributions of $5,000 or more (for example, donations of art, jewelry, vehicles, qualified conservation contributions or intellectual property) the taxpayer must complete Section B of Form 8283. Generally, this would also require the taxpayer to obtain a qualified appraisal of the property’s fair market value.
A charity is not obligated to provide a value to any non-cash contribution; its written receipt only needs to describe the item(s) and note the date of the contribution. The taxpayer, however, is not relieved from making a good-faith estimate of value, which, of course, the IRS may dispute on any audit. “Thrift-shop” value is often used to value donations of clothing and household goods.
A taxpayer who donates a motor vehicle, boat or airplane to charity must deduct either the gross proceeds from the qualified organization’s sale of the vehicle or, if the vehicle is used within the charity’s mission, the fair market value of the vehicle on the date of the contribution, whichever is smaller. The taxpayer must also obtain and attach Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, to its return in addition to Form 8283.
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