IRS Regulations for Charitable Contributions

Regulations about charitable donations focus on two main areas: substantiation of donations of $250 or more and disclosure requirements for goods and services that you may receive as a result of your donation. The IRS Publication 526 provides more detailed information.

Substantiation 

If you want to take a charitable contribution deduction on your income-tax return, you need to substantiate your gifts. You must have the charity's written acknowledgment for any charitable deduction of $250 or more. A canceled check is not enough to support your deduction.

The acknowledgment must include:

  • the amount you contributed;  
  • a description of any property you gave;
  • a statement as to whether the charity provided services or goods (a meal or tickets, for example) as full or partial consideration for your donation, plus a description and good faith value estimate of the services or goods.

Disclosure Requirements for Goods and Services Received 

When a contributor receives goods or services in return for a contribution, a deduction is allowed only for the portion of the contribution that exceeds the fair market value of what is received. The contributor must have an expectation of a quid pro quo transaction even if the exact nature of the goods or services to be received is not known at the time or may not be realized in the year the donation was made.

Also, a charity must provide a contributor with an acknowledgment for a donation of more than $75 that is partially a contribution and partially in exchange for goods and services from the charity. This acknowledgment must indicate that a deductible contribution amount is the donation minus the value of the goods or services and provide a good faith estimate of the value of the goods or services.

De Minimis Standard 
The regulations adapt a de minimis standard whereby goods and services of an insubstantial value provided by the charity for payments of $75 or less will be ignored.

Goods or Services Without Substantial Value 
A charity does not have to include token items with a fair market value less then $72 or 2% of the donation (whichever is less) in its acknowledgment.

Non-cash Contributions

A taxpayer who claims more than $500 (but less than $5,000) or a deduction for a non-cash contribution must, in addition to the substantiation above, complete IRS Form 8283. Non-cash contributions exceeding $5,000 (other than publicly traded securities) must be substantiated with a "qualified appraisal." The threshold is over $10,000 for certain non-publicly traded securities.

A "qualified appraisal" is a detailed document prepared and signed by a qualified appraiser. The donor must receive the appraisal before the tax return date. The appraisal is not submitted directly to the IRS. The appraisal summary (a separate statement prepared on an IRS Form 8283) is attached to the tax return. (Instructions for Form 8283).
If a donor make gifts of two or more properties during a tax year, even to multiple donees, the claimed values of all similar property (i.e., of the same generic category or type, such as stamps, paintings, books, publicly-traded stock, land, jewelry, furniture, or toys) are added together in determining whether the $5,000 or $10,000 limits are exceeded.

For detailed information on IRS guidelines, please read IRS Publication 561.  

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