Published on 10/08/2015
Written by: Paul Bogdanoff, CPA and Tim Dages, CPA
As we enter the last few months of the year we at Bogdanoff Dages and Co., P.C. would like to offer some points and things to think about regarding Charitable Contributions.
First, there are two types of contributions that can be made cash and non-cash. Each type of contribution has its own set of requirements regarding documentation and support for those contributions.
For cash contributions the receiving organization is required to acknowledge in writing the contribution given if the amount is greater than $250. This acknowledgement would be your substantiation for the contribution and should be kept with your other tax documents. If the amount is under the $250 threshold there is no requirement for the organization to give written confirmation although most do. In this case you would need to have a copy of the cancelled check, a bank statement showing the organizations name and amount given or a credit card statement or receipt showing the same information. If cash is given you would want to have a receipt form the organization acknowledging the receipt of the contribution.
If non-cash contributions are made the documentation process becomes a little more detailed. First you would need written acknowledgement from the organization of the contributed items. To go along with the acknowledgment you would need to have a detailed list of the items given, description of the condition (IRS requires the item donated to be in good useable condition) and a value for the item. Values can be obtained from sources such as Craig’s List and websites such as Salvation Army and Goodwill. These websites will usually have a donation section that will have information about fair market value of donated items and lists with ranges of values for the most frequently donated items. You would keep all of this information together to support the amount of the contribution. IRS strongly suggests taking pictures of the donated items to support the condition.
If an item such as a vehicle is given there are additional reporting requirements that the receiving organization and you the taxpayer need to follow. The receiving organization will issue a 1099-K that will show the value of the contribution and this form will need to be sent to the IRS along with your tax return to substantiate the donation taken on your return when filed.
If you donate your time there is not a contribution for that but there is for any out of pocket expenses incurred or mileage driven while you are donating that time.
Charitable Organizations survive and carry on their purpose with the help of donations from individuals like you. One thing to think about while making your donation is that most people donate smaller amounts to numerous organizations throughout the year. If you have an organization that you would really like to support would it make more sense to give more to that organization and cut back on some of the smaller amounts given else where. If all of your allocated contribution dollars were given to one organization you feel strongly about those dollars would be more beneficial to that organization and the tax impact for you would be the same. Focused donations versus the shotgun approach.
In Indiana there is an organization where you can get substantially more bang for your contributed dollar if you are so inclined to donate to it. Scholarship Granting Organizations (SGO) receive contributions from the public and use those dollars to give scholarships to private schools for students who need financial help. The donation can be allocated to a specific qualifying school or to the general fund. A list of qualifying schools can be found on the SGO Indiana website. The additional benefit from a contribution to this organization is the contributor receives a state tax credit in the amount of 50% of the donated amount to be used to offset state tax liability on their Indiana IT-40.
If you would like to discuss any of these ideas or substantiation requirements contact Paul or Tim at Bogdanoff Dages and Co., P.C.