Client Tip for October 2016: Substantiating Charitable Contributions
Substantiating Charitable Contributions
You cannot deduct a cash contribution, regardless of the amount, unless you keep as a record of the contribution a bank record (i.e., canceled check; bank copy of canceled check; or bank statement containing the name of the charity, date, and amount) or a written communication from the charity. The written communication must include the name of the charity, date of the contribution, and amount of the contribution.
Under audit, charitable contributions of $250 or more require a written receipt, letter, postcard, or e-mail from the organization to substantiate the donation. A canceled check is not sufficient evidence for a cash donation of $250 or more. The receipt should show the date of the donation, dollar amount of the monetary gift or description of the property donated, and the estimated value of goods or services received in return for the donation. In figuring whether a gift is $250 or more, separate and regular donations of less than $250 to the same organization do not need to be combined.
A charitable organization must provide a written disclosure statement to donors of a quid pro quo contribution in excess of $75. A quid pro quo contribution is a payment made to a charity by a donor partly as a contribution and partly for goods or services provided to the donor by the charity. For example, if a donor gives a charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. In this example, the charitable contribution portion of the payment is $60. Even though the part of the payment available for deduction does not exceed $75, a disclosure statement must be filed because the donor’s payment (quid pro quo contribution) exceeds $75. The required written disclosure statement must:
- Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of any money (and the value of any property other than money) contributed by the donor over the value of goods or services provided by the charity, and
- Provide the donor with a good faith estimate of the value of the goods or services that the donor received.