Whether or not a charitable donation is tax deductible depends on a number of factors. Cash donations are easy to figure out, but a non-cash donation can be trickier.
Q: Are all charity donations tax deductible or are there certain criteria I need to meet?
A: Charity giving allows you not only to do good but also save taxes. Charitable deductions are a complex area of federal tax law and what follows are the general rules for 2011. State laws vary and are not part of this answer.
Your tax deduction for charitable giving depends on answers to who, what, why, when and where.
: So-called 501(c)(3) organizations, such as United Way and Cancer Society, are most common. See IRS Publication 78.
: Did you give cash or something else?
: Donation intent is important. No quid pro quo allowed.
: Donation must be made in your tax year (most of us are on a calendar year).
: A U.S.-based charity is the safest. Non-U.S. charities may or may not be accepted.
Outright gifts of cash are the easiest to prove and deduct. However, you must substantiate them. If the donation is under $250, then it must be supported by a canceled check, credit card receipt or written communication from the charity. If the donation is $250 or more, then it can only be substantiated by the charity.
Deductions for cash gifts to public charities can’t exceed 50% of your adjusted gross income (AGI). The AGI limit is 30% for cash donations to non-operating private foundations. Contributions exceeding the applicable AGI limit can be carried forward for up to five years.
Gifts of non-cash property are more complex.
Long-term capital gains property
Examples are stocks or bonds held more than one year. You may deduct the current fair market value.
Examples include stocks and bonds held one year or less, inventory and property subject to depreciation recapture. You generally may deduct only the lesser of fair market value or your tax basis.
Tangible personal property
Your deduction depends on the situation. If the property isn’t related to the charity’s tax-exempt function (such as an antique donated for a charity auction), your deduction is limited to you basis.
If the property is related to the charity’s tax-exempt function (such as an antique donated to a museum for its collection), you can deduct the fair market value.
Use of property
Examples include use of a vacation home and a loan of a painting. Generally, you receive no deduction because it isn’t considered a completed gift.
You may deduct only your out-of-pocket expenses, not the fair market value of your services. You can deduct 14 cents per charitable mile driven.
Unless it’s being used by the charity, you generally can deduct only the amount the charity receives when it sells the vehicle.
If you’re age 70-and-a-half or older you can distribute up to $100,000 from your IRA (Roth or traditional) directly to charity. No charitable deduction is allowed for any amount that would otherwise have been taxable, but you save the tax you would have otherwise owed.
Boyle Henderson, CPA, is an owner of Daenen Henderson & Company in Alexandria, LA.
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