Navigating donation tax policies is a winding and confusing road. To guide you along this path so you get the most out of itemizing your deductions, read how to make sure your charity donation is tax-deductible.
Donate to an Eligible Organization
Many organizations pursue charitable causes, but not all of them officially register as a 501(c)(3) with the IRS. You must donate to a 501(c)(3) to safely add your donations to your year’s itemized deductions. These registered charities have a verification letter from the IRS you can see upon request or on their website. You can also search through GuideStar or other sites to determine whether you should donate there. Religious organizations such as churches and temples do not require additional certification to be recognized as a qualifying institution.
Verify with a Receipt
You don’t need a receipt for your initial deduction—you only need to count your total donation amount come tax time. That said, you will need documentation of your claimed donations if the IRS selects you for an audit. For donations valued at more than $250, you need to submit an acknowledgment from the charity you give the money or item(s) to.
Take Away the Value of Donor Incentives
Donations that benefit you in some way change how your deductions work. Essentially, you can only deduct what you give. When you also gain something, you must subtract the value of items you receive from the value of your gift. This final amount is what you deduct. For example, if you donate wholesale fashion tote bags to a registered domestic violence shelter, but receive a t-shirt and gift card afterward, you must subtract the value of the shirt and gift card from your total donation value.
Don’t Deduct These Donations
Perhaps the most helpful part of a guide for making sure your charity donation is tax-deductible is a discussion of donations you can’t deduct. Apart from donations to a non-registered organization, there are several more facets to discuss. Donations to political causes or campaigns do not qualify because, though candidates don’t seek a profit, this gift is benefitting the giver and not going towards charitable work. Also, the government expressly forbids 501(c)(3) charities from influencing the political process. Also, any for-profit organization is ineligible—even a school.
In general, if a donation significantly benefits the giver and does not go directly to a charitable cause, there is a good chance that donation does not count as an itemizable deduction.