All Charitable Donations Are Not Considered Equal

As you begin to gather the information you need to prepare your 2013 personal income tax return, there are a few things to remember when it comes to charitable donations. First, you must ensure that the entity you contributed to is considered by the government as a charitable organization.

Entities that qualify as such are typically:

  • Churches
  • Nonprofit schools and hospitals
  • Federal, state and local governments (as long as the gift is used for a public purpose)
  • 501(c)(3) organizations such as Salvation Army, Goodwill, United Way, etc.
  • War veterans’ groups
  • Civic leagues, social and sports clubs, labor unions and chambers of commerce
  • Foreign organizations (with certain exemptions)
  • Groups that are operated for personal profit
  • Lobbying groups
  • Homeowners’ associations
  • Individuals
  • Political groups or candidates for public office

Entities that are not considered charitable organizations are:

If you have any questions or concerns regarding the status of any charitable organization, you can visit the IRS’ Exempt Organizations Select Check site to determine if the Internal Revenue Service (IRS) acknowledges the organization as a charitable organization.

Types of Charitable Contributions:

Charitable contributions eligible for a tax deduction can be made by cash or noncash. Cash contributions include those paid by cash, check, electronic funds transfer, debit card, credit card or payroll deduction. In order to deduct on your return, you must keep one of the following:

  • A cancelled check
  • A bank or credit card statement (the organization must be clearly identified)
  • A receipt from the qualified organization
  • Payroll deduction records

You must reduce any contribution made by any benefit received from the charitable organization. Typically, these types of contributions are made to universities or colleges, where the donor may receive priority standing in obtaining tickets.

Noncash contributions are any gifts to charitable organization other than cash. These can include:

  •  Clothing
  • Household goods
  • Appreciated stock
  • Vehicles
  • Real estate

The IRS has different reporting requirements depending upon the total amount of noncash contributions made in the taxable year. Note that any noncash contributions of property that exceeds $5,000 must be accompanied by acknowledgement from a qualified appraiser to substantiate the value of the deduction. The only exception to this rule is in the case of publicly traded stocks, where the value is listed on an exchange such as the New York Stock Exchange or NASDAQ.

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This article was originally published in Illuminations: Facts & Figures from people with a brighter way, a Rea & Associates enewsletter, 1/2/2014.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.