24. Contributions
Table of Contents
* What's New for 2005
* Reminders
* Introduction
* Useful Items - You may want to see:
* Organizations That Qualify To Receive Deductible Contributions
o Types of Qualified Organizations
* Contributions You Can Deduct
o Contributions From Which You Benefit
o Expenses Paid for Student Living With You
o Out-of-Pocket Expenses in Giving Services
* Contributions You Cannot Deduct
o Contributions to Individuals
o Contributions to Nonqualified Organizations
o Contributions From Which You Benefit
o Value of Time or Services
o Personal Expenses
o Appraisal Fees
* Contributions of Property
o Deduction more than $500.
o Exception 1—vehicle used or improved by organization.
o Exception 2—vehicle given or sold to needy individual.
o Deduction $500 or less.
o Right to use property.
o Future interest.
o Determining Fair Market Value
o Giving Property That Has Decreased in Value
o Giving Property That Has Increased in Value
* When To Deduct
o Checks.
o Credit card.
o Pay-by-phone account.
o Stock certificate.
o Promissory note.
o Option.
o Borrowed funds.
* Limits on Deductions
o 50% Limit
o 30% Limit
o Special 30% Limit for Capital Gain Property
o 20% Limit
o Carryovers
* Records To Keep
o Cash Contributions
o Noncash Contributions
* How To Report
What's New for 2005
Katrina Emergency Tax Relief Act of 2005. This Act provides tax relief for
persons affected by Hurricane Katrina. Under the Act, you may be able to:
*
Use a higher standard mileage rate,
*
Exclude mileage reimbursements from income, and
*
Claim a deduction in excess of the usual limits shown in Limits on
Deductions in this chapter.
See Publication 4492.
Contributions of cars, boats, and airplanes. If you donate a car, boat, or
airplane to a qualified organization after 2004, your deduction generally
is limited to the gross proceeds from its sale by the organization. This
rule applies if the claimed value of the donated vehicle is more than $500.
For exceptions and more information, see Cars, Boats and Airplanes under
Contributions of Property.
Reminders
Disaster relief. You can deduct contributions earmarked for flood relief,
hurricane relief, or other disaster relief to a qualified organization
(defined later under Organizations That Qualify To Receive Deductible
Contributions). However, you cannot deduct contributions earmarked for
relief of a particular individual or family.
Written acknowledgment required. You can claim a deduction for a
contribution of $250 or more only if you have a written acknowledgment of
your contribution from the qualified organization or if you have certain
payroll deduction records. For more information, see Records To Keep, later
in this chapter.
Payment partly for goods or services. A qualified organization must give
you a written statement if you make a payment that is more than $75 and is
partly a contribution and partly for goods or services. The statement must
tell you that you can deduct only the amount of your payment that is more
than the value of the goods or services you received. It must also give you
a good faith estimate of the value of those goods or services. See
Contributions From Which You Benefit, later in this chapter, for more
information.
Limit on itemized deductions. If your adjusted gross income is more than
$145,950 ($72,975 if you are married filing separately), the overall amount
of your itemized deductions may be limited. See chapter 29 for more
information about this limit.
Introduction
This chapter explains how to claim a deduction for your charitable
contributions. It discusses:
*
Organizations that are qualified to receive deductible charitable
contributions,
*
The types of contributions you can deduct,
*
How much you can deduct,
*
What records to keep, and
*
How to report your charitable contributions.
A charitable contribution is a donation or gift to, or for the use of, a
qualified organization. It is voluntary and is made without getting, or
expecting to get, anything of equal value.
Form 1040 required. To deduct a charitable contribution, you must file
Form 1040 and itemize deductions on Schedule A. The amount of your
deduction may be limited if certain rules and limits explained in this
chapter apply to you.
Useful Items - You may want to see:
Publication
*
78 Cumulative List of Organizations
*
526 Charitable Contributions
*
561 Determining the Value of Donated Property
Form (and Instructions)
*
Schedule A (Form 1040)
Itemized Deductions
*
8283
Noncash Charitable Contributions
Organizations That Qualify To Receive Deductible Contributions
You can deduct your contributions only if you make them to a qualified
organization. To become a qualified organization, most organizations other
than churches and governments, as described below, must apply to the IRS.
Tip
You can ask any organization whether it is a qualified organization, and
most will be able to tell you. Or you can check IRS Publication 78, which
lists most qualified organizations. You may find Publication 78 in your
local library's reference section, or on the internet at www.irs.gov. You
can also call the IRS Tax Exempt/Government Entities Customer Service at
1-877-829-5500 to find out if an organization is qualified.
Types of Qualified Organizations
Generally, only the five following types of organizations can be qualified
organizations.
1.
A community chest, corporation, trust, fund, or foundation organized
or created in or under the laws of the United States, any state, the
District of Columbia, or any possession of the United States (including
Puerto Rico). It must be organized and operated only for one or more of the
following purposes.
1.
Religious.
2.
Charitable.
3.
Educational.
4.
Scientific.
5.
Literary.
6.
The prevention of cruelty to children or animals.
Certain organizations that foster national or international amateur
sports competition also qualify.
2.
War veterans' organizations, including posts, auxiliaries, trusts, or
foundations, organized in the United States or any of its possessions.
3.
Domestic fraternal societies, orders, and associations operating
under the lodge system.
Note. Your contribution to this type of organization is deductible
only if it is to be used solely for charitable, religious, scientific,
literary, or educational purposes, or for the prevention of cruelty to
children or animals.
4.
Certain nonprofit cemetery companies or corporations.
Note. Your contribution to this type of organization is not
deductible if it can be used for the care of a specific lot or mausoleum crypt.
5.
The United States or any state, the District of Columbia, a U.S.
possession (including Puerto Rico), a political subdivision of a state or
U.S. possession, or an Indian tribal government or any of its subdivisions
that perform substantial government functions.
Note. To be deductible, your contribution to this type of
organization must be made solely for public purposes.
Examples. Qualified organizations include:
*
Churches, a convention or association of churches, temples,
synagogues, mosques, and other religious organizations.
*
Most nonprofit charitable organizations such as the Red Cross and the
United Way.
*
Most nonprofit educational organizations, including the Boy and Girl
Scouts of America, colleges, museums, and day-care centers if substantially
all the child care provided is to enable individuals (the parents) to be
gainfully employed and the services are available to the general public.
However, if your contribution is a substitute for tuition or other
enrollment fee, it is not deductible as a charitable contribution, as
explained later under Contributions You Cannot Deduct.
*
Nonprofit hospitals and medical research organizations.
*
Utility company emergency energy programs, if the utility company is
an agent for a charitable organization that assists individuals with
emergency energy needs.
*
Nonprofit volunteer fire companies.
*
Public parks and recreation facilities (but not entry or usage fees).
*
Civil defense organizations.
Certain foreign charitable organizations. Under income tax treaties with
Canada, Israel, and Mexico, you may be able to deduct contributions to
certain Canadian, Israeli, or Mexican charitable organizations. Generally,
you must have income from sources in that country. For additional
information on the deduction of contributions to Canadian charities, see
Publication 597, Information on the United States-Canada Income Tax Treaty.
If you need more information on how to figure your contribution to Mexican
and Israeli charities, see Publication 526.
Contributions You Can Deduct
Generally, you can deduct your contributions of money or property that you
make to, or for the use of, a qualified organization. A gift or
contribution is “for the use of” a qualified organization when it is held
in a legally enforceable trust for the qualified organization or in a
similar legal arrangement.
If you give property to a qualified organization, you generally can deduct
the fair market value of the property at the time of the contribution. See
Contributions of Property, later in this chapter.
Your deduction for charitable contributions is generally limited to 50% of
your adjusted gross income, but in some cases 20% and 30% limits may apply.
See Limits on Deductions, later.
Table 24-1 lists some examples of contributions you can deduct and some
that you cannot deduct.
Contributions From Which You Benefit
If you receive a benefit as a result of making a contribution to a
qualified organization, you can deduct only the amount of your contribution
that is more than the value of the benefit you receive.
If you pay more than fair market value to a qualified organization for
merchandise, goods, or services, the amount you pay that is more than the
value of the item can be a charitable contribution. For the excess amount
to qualify, you must pay it with the intent to make a charitable contribution.
Example 1.
You pay $65 for a ticket to a dinner-dance at a church. All of the proceeds
of the function go to the church. The ticket to the dinner-dance has a fair
market value of $25. When you buy your ticket, you know that its value is
less than your payment. To figure the amount of your charitable
contribution, you subtract the value of the benefit you receive ($25) from
your total payment ($65). You can deduct $40 as a contribution to the church.
Example 2.
At a fund-raising auction conducted by a charity, you pay $600 for a week's
stay at a beach house. The amount you pay is no more than the fair rental
value. You have not made a deductible charitable contribution.
Athletic events. If you make a payment to, or for the benefit of, a
college or university and, as a result, you receive the right to buy
tickets to an athletic event in the athletic stadium of the college or
university, you can deduct 80% of the payment as a charitable contribution.
If any part of your payment is for tickets (rather than the right to buy
tickets), that part is not deductible. In that case, subtract the price of
the tickets from your payment. 80% of the remaining amount is a charitable
contribution.
Example 1.
You pay $300 a year for membership in an athletic scholarship program
maintained by a university (a qualified organization). The only benefit of
membership is that you have the right to buy one season ticket for a seat
in a designated area of the stadium at the university's home football
games. You can deduct $240 (80% of $300) as a charitable contribution.
Table 24-1. Examples of Charitable Contributions—A Quick Check
Use the following lists for a quick check of contributions you can or
cannot deduct. See the rest of this chapter for more information and
additional rules and limits that may apply.
Deductible As
Charitable Contributions Not Deductible
As Charitable Contributions
Money or property you give to:
*
Churches, synagogues, temples, mosques, and other religious organizations
*
Federal, state, and local governments, if your contribution is solely
for public purposes (for example, a gift to reduce the public debt)
*
Nonprofit schools and hospitals
*
Public parks and recreation facilities (but not entry or usage fees)
*
Salvation Army, Red Cross, CARE, Goodwill Industries, United Way, Boy
Scouts, Girl Scouts, Boys and Girls Clubs of America, etc.
*
War veterans groups
Money or property you give to:
*
Civic leagues, social and sports clubs, labor unions, and chambers of
commerce
*
Foreign organizations (except certain Canadian, Israeli, and Mexican
charities)
*
Groups that are run for personal profit
*
Groups whose purpose is to lobby for law changes
*
Homeowners' associations
*
Individuals
*
Political groups or candidates for public office
Costs you pay for a student living with you, sponsored by a qualified
organization Noncharitable payments to federal, state, and local governments
Out-of-pocket expenses when you serve a qualified organization as a
volunteer Cost of raffle, bingo, or lottery tickets
Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or
similar groups
Tuition
Value of your time or services
Value of blood given to a blood bank
Example 2.
The facts are the same as in Example 1 except that your $300 payment
included the purchase of one season ticket for the stated ticket price of
$120. You must subtract the usual price of a ticket ($120) from your $300
payment. The result is $180. Your deductible charitable contribution is
$144 (80% of $180).
Charity benefit events. If you pay a qualified organization more than
fair market value for the right to attend a charity ball, banquet, show,
sporting event, or other benefit event, you can deduct only the amount that
is more than the value of the privileges or other benefits you receive.
If there is an established charge for the event, that charge is the value
of your benefit. If there is no established charge, your contribution is
that part of your payment that is more than the reasonable value of the
right to attend the event. Whether you use the tickets or other privileges
has no effect on the amount you can deduct. However, if you return the
ticket to the qualified organization for resale, you can deduct the entire
amount you paid for the ticket.
Caution
Even if the ticket or other evidence of payment indicates that the payment
is a “contribution,” this does not mean you can deduct the entire amount.
If the ticket shows the price of admission and the amount of the
contribution, you can deduct the contribution amount.
Example.
You pay $40 to see a special showing of a movie for the benefit of a
qualified organization. Printed on the ticket is “Contribution—$40.” If the
regular price for the movie is $8, your contribution is $32 ($40 payment -
$8 regular price).
Membership fees or dues. You may be able to deduct membership fees or
dues you pay to a qualified organization. However, you can deduct only the
amount that is more than the value of the benefits you receive. You cannot
deduct dues, fees, or assessments paid to country clubs and other social
organizations. They are not qualified organizations.
Certain membership benefits can be disregarded. Both you and the
organization can disregard certain membership benefits you get in return
for an annual payment of $75 or less to the qualified organization. You can
pay more than $75 to the organization if the organization does not require
a larger payment for you to get the benefits. The following benefits are
covered under this rule.
1.
Any rights or privileges, other than those discussed under Athletic
events, earlier, that you can use frequently while you are a member, such as:
1.
Free or discounted admission to the organization's facilities
or events,
2.
Free or discounted parking,
3.
Preferred access to goods or services, and
4.
Discounts on the purchase of goods and services.
2.
Admission, while you are a member, to events that are open only to
members of the organization, if the organization reasonably projects that
the cost per person (excluding any allocated overhead) is not more than $8.30.
Token items. You can deduct your entire payment to a qualified
organization as a charitable contribution if both of the following are true.
*
You get a small item or other benefit of token value.
*
The qualified organization correctly determines that the value of the
item or benefit you received is not substantial and informs you that you
can deduct your payment in full.
Written statement. A qualified organization must give you a written
statement if you make a payment to it that is more than $75 and is partly a
contribution and partly for goods or services. The statement must tell you
that you can deduct only the amount of your payment that is more than the
value of the goods or services you received. It must also give you a good
faith estimate of the value of those goods or services.
The organization can give you the statement either when it solicits or
when it receives the payment from you.
Exception. An organization will not have to give you this statement if
one of the following is true.
1.
The organization is:
1.
The type of organization described in (5) under Types of
Qualified Organizations, earlier, or
2.
Formed only for religious purposes, and the only benefit you
receive is an intangible religious benefit (such as admission to a
religious ceremony) that generally is not sold in commercial transactions
outside the donative context.
2.
You receive only items whose value is not substantial. See Token
items, earlier.
3.
You receive only membership benefits that can be disregarded, as
described earlier.
Expenses Paid for Student Living With You
You may be able to deduct some expenses of having a student live with you.
You can deduct qualifying expenses for a foreign or American student who:
1.
Lives in your home under a written agreement between you and a
qualified organization as part of a program of the organization to provide
educational opportunities for the student,
2.
Is not your relative or dependent, and
3.
Is a full-time student in the twelfth or any lower grade at a school
in the United States.
Tip
You can deduct up to $50 a month for each full calendar month the student
lives with you. Any month when conditions (1) through (3) above are met for
15 days or more counts as a full month.
For additional information, see Expenses Paid for Student Living With You
in Publication 526.
Mutual exchange program. You cannot deduct the costs of a foreign student
living in your home under a mutual exchange program through which your
child will live with a family in a foreign country.
Table 24-2. Volunteers' Questions and Answers
If you do volunteer work for a qualified organization, the following
questions and answers may apply to you. All of the rules explained in this
chapter also apply. See, in particular, Out-of-Pocket Expenses in Giving
Services.
Question Answer
I do volunteer work 6 hours a week in the office of a qualified
organization. The receptionist is paid $6 an hour to do the same work I do.
Can I deduct $36 a week for my time?
No, you cannot deduct the value of your time or services.
The office is 30 miles from my home. Can I deduct any of my car expenses
for these trips? Yes, you can deduct the costs of gas and oil that are
directly related to getting to and from the place where you are a
volunteer. If you don't want to figure your actual costs, you can deduct 14
cents for each mile.
I volunteer as a Red Cross nurse's aide at a hospital. Can I deduct the
cost of uniforms that I must wear? Yes, you can deduct the cost of buying
and cleaning your uniforms if the hospital is a qualified organization, the
uniforms are not suitable for everyday use, and you must wear them when
volunteering.
I pay a babysitter to watch my children while I do volunteer work for a
qualified organization. Can I deduct these costs? No, you cannot deduct
payments for child care expenses as a charitable contribution, even if they
are necessary so you can do volunteer work for a qualified organization.
(If you have child care expenses so you can work for pay, see chapter 32.)
Out-of-Pocket Expenses in Giving Services
You may be able to deduct some amounts you pay in giving services to a
qualified organization. The amounts must be:
*
Unreimbursed,
*
Directly connected with the services,
*
Expenses you had only because of the services you gave, and
*
Not personal, living, or family expenses.
Table 24-2 contains questions and answers that apply to some individuals
who volunteer their services.
Conventions. If you are a chosen representative attending a convention of
a qualified organization, you can deduct actual unreimbursed expenses for
travel and transportation, including a reasonable amount for meals and
lodging, while away from home overnight in connection with the convention.
However, see Travel, later.
You cannot deduct personal expenses for sightseeing, fishing parties,
theater tickets, or nightclubs. You also cannot deduct travel, meals and
lodging, and other expenses for your spouse or children.
You cannot deduct your expenses in attending a church convention if you
go only as a member of your church rather than as a chosen representative.
You can deduct unreimbursed expenses that are directly connected with
giving services for your church during the convention.
Uniforms. You can deduct the cost and upkeep of uniforms that are not
suitable for everyday use and that you must wear while performing donated
services for a charitable organization.
Foster parents. You may be able to deduct as a charitable contribution
some of the costs of being a foster parent (foster care provider) if you
have no profit motive in providing the foster care and are not, in fact,
making a profit. A qualified organization must designate the individuals
you take into your home for foster care.
You can deduct expenses that meet both of the following requirements.
1.
They are unreimbursed out-of-pocket expenses to feed, clothe, and
care for the foster child.
2.
They must be mainly to benefit the qualified organization.
Unreimbursed expenses that you cannot deduct as charitable contributions
may be considered support provided by you in determining whether you can
claim the foster child as a dependent. For details, see chapter 3.
Example.
You cared for a foster child because you wanted to adopt her, not to
benefit the agency that placed her in your home. Your unreimbursed expenses
are not deductible as charitable contributions.
Car expenses. You can deduct unreimbursed out-of-pocket expenses, such as
the cost of gas and oil, that are directly related to the use of your car
in giving services to a charitable organization. You cannot deduct general
repair and maintenance expenses, depreciation, registration fees, or the
costs of tires or insurance.
If you do not want to deduct your actual expenses, you can use a
standard mileage rate of 14 cents a mile to figure your contribution.
You can deduct parking fees and tolls whether you use your actual
expenses or the standard mileage rate.
You must keep reliable written records of your car expenses. For more
information, see Car expenses under Records To Keep, later.
Travel. Generally, you can claim a charitable contribution deduction for
travel expenses necessarily incurred while you are away from home
performing services for a charitable organization only if there is no
significant element of personal pleasure, recreation, or vacation in the
travel. This applies whether you pay the expenses directly or indirectly.
You are paying the expenses indirectly if you make a payment to the
charitable organization and the organization pays for your travel expenses.
The deduction for travel expenses will not be denied simply because you
enjoy providing services to the charitable organization. Even if you enjoy
the trip, you can take a charitable contribution deduction for your travel
expenses if you are on duty in a genuine and substantial sense throughout
the trip. However, if you have only nominal duties, or if for significant
parts of the trip you do not have any duties, you cannot deduct your travel
expenses.
Example 1.
You are a troop leader for a tax-exempt youth group and you help take the
group on a camping trip. You are responsible for overseeing the setup of
the camp and for providing adult supervision for other activities during
the entire trip. You participate in the activities of the group and really
enjoy your time with them. You oversee the breaking of camp and you help
transport the group home. You can deduct your travel expenses.
Example 2.
You sail from one island to another and spend 8 hours a day counting whales
and other forms of marine life. The project is sponsored by a charitable
organization. In most circumstances, you cannot deduct your expenses.
Example 3.
You work for several hours each morning on an archaeological dig sponsored
by a charitable organization. The rest of the day is free for recreation
and sightseeing. You cannot take a charitable contribution deduction even
though you work very hard during those few hours.
Example 4.
You spend the entire day attending a charitable organization's regional
meeting as a chosen representative. In the evening you go to the theater.
You can claim your travel expenses as charitable contributions, but you
cannot claim the cost of your evening at the theater.
Daily allowance (per diem). If you provide services for a charitable
organization and receive a daily allowance to cover reasonable travel
expenses, including meals and lodging while away from home overnight, you
must include in income the amount of the allowance that is more than your
deductible travel expenses. You can deduct your necessary travel expenses
that are more than the allowance.
Deductible travel expenses. These include:
*
Air, rail, and bus transportation,
*
Out-of-pocket expenses for your car,
*
Taxi fares or other costs of transportation between the airport or
station and your hotel,
*
Lodging costs, and
*
The cost of meals.
Because these travel expenses are not business-related, they are not
subject to the same limits as business-related expenses. For information on
business travel expenses, see Travel Expenses in chapter 26.
Contributions You Cannot Deduct
There are some contributions you cannot deduct, such as those made to
specific individuals and those made to nonqualified organizations. (See
Contributions to Individuals and Contributions to Nonqualified
Organizations, next). There are others you can deduct only part of, as
discussed later under Contributions From Which You Benefit.
Contributions to Individuals
You cannot deduct contributions to specific individuals, including the
following:
*
Contributions to fraternal societies made for the purpose of paying
medical or burial expenses of deceased members.
*
Contributions to individuals who are needy or worthy. This includes
contributions to a qualified organization if you indicate that your
contribution is for a specific person. But you can deduct a contribution
that you give to a qualified organization that in turn helps needy or
worthy individuals if you do not indicate that your contribution is for a
specific person.
*
Payments to a member of the clergy that can be spent as he or she
wishes, such as for personal expenses.
*
Expenses you paid for another person who provided services to a
qualified organization.
Example. Your son does missionary work. You pay his expenses. You
cannot claim a deduction for your son's unreimbursed expenses related to
his contribution of services.
*
Payments to a hospital that are for services for a specific patient.
You cannot deduct these payments even if the hospital is operated by a
city, a state, or other qualified organization.
Contributions to Nonqualified Organizations
You cannot deduct contributions to organizations that are not qualified to
receive tax-deductible contributions, including the following.
1.
Certain state bar associations if:
1.
The state bar is not a political subdivision of a state,
2.
The bar has private, as well as public, purposes, such as
promoting the professional interests of members, and
3.
Your contribution is unrestricted and can be used for private
purposes.
2.
Chambers of commerce and other business leagues or organizations (but
see chapter 28).
3.
Civic leagues and associations.
4.
Communist organizations.
5.
Country clubs and other social clubs.
6.
Foreign organizations other than:
1.
A U.S. organization that transfers funds to a charitable
foreign organization if the U.S. organization controls the use of the funds
or if the foreign organization is only an administrative arm of the U.S.
organization, or
2.
Certain Canadian, Israeli, or Mexican charitable organizations.
See Certain foreign charitable organizations under Organizations That
Qualify To Receive Deductible Contributions, earlier.
7.
Homeowners' associations.
8.
Labor unions (but see chapter 28).
9.
Political organizations and candidates.
Contributions From Which You Benefit
If you receive or expect to receive a financial or economic benefit as a
result of making a contribution to a qualified organization, you cannot
deduct the part of the contribution that represents the value of the
benefit you receive. These contributions include the following.
*
Contributions for lobbying. This includes amounts that you earmark
for use in, or in connection with, influencing specific legislation.
*
Contributions to a retirement home that are clearly for room, board,
maintenance, or admittance. Also, if the amount of your contribution
depends on the type or size of apartment you will occupy, it is not a
charitable contribution.
*
Costs of raffles, bingo, lottery, etc. You cannot deduct as a
charitable contribution amounts you pay to buy raffle or lottery tickets or
to play bingo or other games of chance. For information on how to report
gambling winnings and losses, see chapters 12 and 28.
*
Dues to fraternal orders and similar groups. However, see Membership
fees or dues, earlier, under Contributions You Can Deduct.
*
Tuition, or amounts you pay instead of tuition, even if you pay them
for children to attend parochial schools or qualifying nonprofit day-care
centers. You also cannot deduct any fixed amount you may be required to pay
in addition to the tuition fee to enroll in a private school, even if it is
designated as a “donation.”
Value of Time or Services
You cannot deduct the value of your time or services, including:
*
Blood donations to the Red Cross or to blood banks, and
*
The value of income lost while you work as an unpaid volunteer for a
qualified organization.
Personal Expenses
You cannot deduct personal, living, or family expenses, such as:
*
The cost of meals you eat while you perform services for a qualified
organization unless it is necessary for you to be away from home overnight
while performing the services, or
*
Adoption expenses, including fees paid to an adoption agency and the
costs of keeping a child in your home before adoption is final (but see
Adoption Credit in chapter 37, and the instructions for Form 8839,
Qualified Adoption Expenses).
You also may be able to claim an exemption for the child. See Adopted
child in chapter 3.
Appraisal Fees
Fees that you pay to find the fair market value of donated property are not
deductible as contributions (but see chapter 28).
Contributions of Property
If you contribute property to a qualified organization, the amount of your
charitable contribution is generally the fair market value of the property
at the time of the contribution. However, if the property has increased in
value, you may have to make some adjustments to the amount of your
deduction. See Giving Property That Has Increased in Value, later.
For information about the records you must keep and the information you
must furnish with your return if you donate property, see Records To Keep
and How To Report, later.
Cars, boats, and airplanes. The following rules apply to any donation of
a car to a qualified organization after December 31, 2004. These rules also
apply to any donation of a boat, airplane, or any motor vehicle
manufactured mainly for use on public streets, roads, and highways.
Deduction more than $500. If the qualified organization sells the car and
you claim a deduction of more than $500, the following rules apply.
1.
You can deduct the smaller of:
1.
The gross proceeds from the sale of the car by the organization, or
2.
The car's fair market value on the date of the contribution. If
the car's fair market value was more than your cost or other basis, you may
have to reduce the fair market value to get the deductible amount, as
described under Giving Property That Has Increased in Value in Publication 526.
2.
You must attach to your return the copy of the Form 1098-C,
Contributions of Motor Vehicles, Boats, and Airplanes, (or other statement
containing the same information as Form 1098-C) you received from the
organization. The Form 1098-C (or other statement) will show the gross
proceeds from the sale of the car.
However, different rules apply if exception 1 or exception 2 (described
next) applies.
If you do not attach Form 1098-C (or other statement), you cannot deduct
your contribution.
You must get Form 1098-C (or other statement) within 30 days of the sale
of the car. However, if you donated the car before September 2, 2005, you
must get Form 1098-C (or other statement) within 30 days of the sale of the
car or, if later, October 1, 2005.
Exception 1—vehicle used or improved by organization. If the qualified
organization makes a significant intervening use of or material improvement
to the car before transferring it and you claim a deduction of more than
$500, the following rules apply.
*
You generally can deduct the car's fair market value at the time of
the contribution. But if the car's fair market value was more than your
cost or other basis, you may have to reduce the fair market value to get
the deductible amount, as described under Giving Property That Has
Increased in Value in Publication 526.
*
You must attach to your return a copy of Form 1098-C (or other
statement containing the same information as Form 1098-C).
The Form 1098-C (or other statement) will show whether the qualified
organization makes a significant intervening use of or material improvement
to the car.
If you do not attach Form 1098-C (or other statement), you cannot deduct
your contribution.
You must get Form 1098-C (or other statement) within 30 days of your
donation. However, if you donated the car before September 2, 2005, you
have until October 1, 2005, to get Form 1098-C (or other statement).
Exception 2—vehicle given or sold to needy individual. If the qualified
organization will give the car, or sell it for a price well below fair
market value, to a needy individual to further the organization's
charitable purpose, and you claim a deduction of more than $500, the
following rules apply.
*
You generally can deduct the car's fair market value at the time of
the contribution. But if the car's fair market value was more than your
cost or other basis, you may have to reduce the fair market value to get
the deductible amount, as described under Giving Property That Has
Increased in Value in Publication 526.
*
You must attach to your return a copy of Form 1098-C (or other
statement containing the same information as Form 1098-C).
The Form 1098-C (or other statement) will show whether this exception applies.
If you do not attach Form 1098-C (or other statement), you cannot deduct
your contribution.
You must get Form 1098-C (or other statement) within 30 days of your
donation. However, if you donated the car before September 2, 2005, you
have until October 1, 2005, to get Form 1098-C (or other statement).
Example.
Anita donates a used car to a qualified organization. A used car guide
shows the fair market value for this type of car is $6,000. However, Anita
gets a Form 1098-C from the organization showing the car was sold for $900.
Neither exception 1 nor exception 2 applies. If Anita itemizes her
deductions, she can deduct $900 for her donation. She must attach the Form
1098-C to her return.
Deduction $500 or less. If the qualified organization sells the car for
$500 or less and exceptions 1 and 2 (described earlier) do not apply, the
following rules apply.
1.
You can deduct the smaller of:
1.
$500, or
2.
The car's fair market value on the date of the contribution.
But if the car's fair market value was more than your cost or other basis,
you may have to reduce the fair market value to get the deductible amount,
as described under Giving Property That Has Increased in Value in
Publication 526.
2.
If the car's fair market value is $250 or more, you must have a
written statement from the qualified organization acknowledging your
donation. The statement must contain the information and meet the tests for
an acknowledgement described under Deductions of At Least $250 But Not More
Than $500 under Records To Keep, later.
Partial interest in property. Generally, you cannot deduct a charitable
contribution (not made by a transfer in trust) of less than your entire
interest in property.
Right to use property. A contribution of the right to use property is a
contribution of less than your entire interest in that property and is not
deductible. For exceptions and more information, see Partial Interest in
Property Not in Trust in Publication 561.
Future interests in tangible personal property. You can deduct the value
of a charitable contribution of a future interest in tangible personal
property only after all intervening interests in and rights to the actual
possession or enjoyment of the property have either expired or been turned
over to someone other than yourself, a related person, or a related
organization.
Future interest. This is any interest that is to begin at some future
time, regardless of whether it is designated as a future interest under
state law.
Determining Fair Market Value
This section discusses general guidelines for determining the fair market
value of various types of donated property.
Fair market value is the price at which property would change hands between
a willing buyer and a willing seller, neither having to buy or sell, and
both having reasonable knowledge of all the relevant facts. Publication 561
contains a more complete discussion.
Used clothing and household goods. Generally, the fair market value of
used clothing and household goods is far less than its original cost.
For used clothing, you should claim as the value the price that buyers of
used items actually pay in used clothing stores, such as consignment or
thrift shops. See Household Goods in Publication 561 for information on the
valuation of household goods, such as furniture, appliances, and linens.
Example.
Dawn Greene donated a coat to a thrift store operated by her church. She
paid $300 for the coat 3 years ago. Similar coats in the thrift store sell
for $50. The fair market value of the coat is reasonably determined to be
$50. Dawn's donation is limited to $50.
Cars, boats, and aircraft. If you contribute a car, boat, or aircraft to
a charitable organization, you must determine its fair market value.
Certain commercial firms and trade organizations publish used car pricing
guides, commonly called “blue books,” containing complete dealer sale
prices or dealer average prices for recent model years. The guides may be
published monthly or seasonally and for different regions of the country.
These guides also provide estimates for adjusting for unusual equipment,
unusual mileage, and physical condition. The prices are not “official” and
these publications are not considered an appraisal of any specific donated
property. But they do provide clues for making an appraisal and suggest
relative prices for comparison with current sales and offerings in your area.
Example.
You donate a used car in poor condition to a local high school for use by
students studying car repair. A used car guide shows the dealer retail
value for this type of car in poor condition is $1,600. However, the guide
shows the price for a private party sale of the car is only $750. The fair
market value of the car is considered to be $750.
Large quantities. If you contribute a large number of the same item, fair
market value is the price at which comparable numbers of the item are being
sold.
Giving Property That Has Decreased in Value
If you contribute property with a fair market value that is less than your
basis in it, your deduction is limited to its fair market value. You cannot
claim a deduction for the difference between the property's basis and its
fair market value.
Giving Property That Has Increased in Value
If you contribute property with a fair market value that is more than your
basis in it, you may have to reduce the fair market value by the amount of
appreciation (increase in value) when you figure your deduction.
Your basis in property is generally what you paid for it. See chapter 13 if
you need more information about basis.
Different rules apply to figuring your deduction, depending on whether the
property is:
1.
Ordinary income property, or
2.
Capital gain property.
Ordinary income property. Property is ordinary income property if its
sale at fair market value on the date it was contributed would have
resulted in ordinary income or in short-term capital gain. Examples of
ordinary income property are inventory, works of art created by the donor,
manuscripts prepared by the donor, and capital assets held 1 year or less.
Amount of deduction. The amount you can deduct for a contribution of
ordinary income property is its fair market value minus the amount that
would be ordinary income or short-term capital gain if you sold the
property for its fair market value. Generally, this rule limits the
deduction to your basis in the property.
Example.
You donate stock that you held for 5 months to your church. The fair market
value of the stock on the day you donate it is $1,000, but you paid only
$800 (your basis). Because the $200 of appreciation would be short-term
capital gain if you sold the stock, your deduction is limited to $800 (fair
market value minus the appreciation).
Capital gain property. Property is capital gain property if its sale at
fair market value on the date of the contribution would have resulted in
long-term capital gain. It includes capital assets held more than 1 year,
as well as certain real property and depreciable property used in your
trade or business and, generally, held more than 1 year.
Amount of deduction — general rule. When figuring your deduction for a
gift of capital gain property, you usually can use the fair market value of
the gift.
Exceptions. In certain situations, you must reduce the fair market value
by any amount that would have been long-term capital gain if you had sold
the property for its fair market value. Generally, this means reducing the
fair market value to the property's cost or other basis.
Bargain sales. A bargain sale of property to a qualified organization (a
sale or exchange for less than the property's fair market value) is partly
a charitable contribution and partly a sale or exchange. A bargain sale may
result in a taxable gain.
More information. For more information on donated appreciated property,
see Giving Property That Has Increased in Value in Publication 526.
When To Deduct
You can deduct your contributions only in the year you actually make them
in cash or other property (or in a later carryover year, as explained later
under Carryovers). This applies whether you use the cash or an accrual
method of accounting.
caution
Tsunami donations deducted in 2004. If you made a cash contribution in
January 2005 for the relief of victims of the December 26, 2004, Indian
Ocean tsunami and chose to deduct it on your 2004 return, you cannot deduct
it on your 2005 return.
Time of making contribution. Usually, you make a contribution at the time
of its unconditional delivery.
Checks. A check that you mail to a charity is considered delivered on the
date you mail it.
Credit card. Contributions charged on your credit card are deductible in
the year you make the charge.
Pay-by-phone account. If you use a pay-by-phone account, the date you
make a contribution is the date the financial institution pays the amount.
This date should be shown on the statement the financial institution sends
to you.
Stock certificate. A gift to a charity of a properly endorsed stock
certificate is completed on the date of mailing or other delivery to the
charity or to the charity's agent. However, if you give a stock certificate
to your agent or to the issuing corporation for transfer to the name of the
charity, your gift is not completed until the date the stock is transferred
on the books of the corporation.
Promissory note. If you issue and deliver a promissory note to a
charitable organization as a contribution, it is not a contribution until
you make the note payments.
Option. If you grant an option to buy real property at a bargain price
to a charitable organization, you cannot take a deduction until the
organization exercises the option.
Borrowed funds. If you make a contribution with borrowed funds, you can
deduct the contribution in the year you make it, regardless of when you
repay the loan.
Limits on Deductions
If your total contributions for the year are 20% or less of your adjusted
gross income, you do not need to read this section. The limits discussed
here do not apply to you.
The amount of your deduction is limited to 50% of your adjusted gross
income and may be limited to 30% or 20% of your adjusted gross income,
depending on the type of property you give and the type of organization you
give it to. These limits are described below.
If your contributions are more than any of the limits that apply, see
Carryovers, later.
50% Limit
This limit applies to the total of all charitable contributions you make
during the year. This means that your deduction for charitable
contributions cannot be more than 50% of your adjusted gross income for the
year.
Generally, the 50% limit is the only limit that applies to gifts to
organizations listed below under 50% limit organizations. But there is one
exception. A 30% limit also applies to these gifts if they are gifts of
capital gain property for which you figure your deduction using fair market
value without reduction for appreciation. (See Special 30% Limit for
Capital Gain Property, later.)
50% limit organizations. You can ask any organization whether it is a 50%
limit organization and most will be able to tell you. Or you can check IRS
Publication 78 or call the IRS Tax Exempt/Government Entities Customer
Service at the number listed earlier under Organizations that Qualify To
Receive Deductible Contributions. The following is a partial list of the
types of organizations that are 50% limit organizations.
*
Churches and conventions or associations of churches.
*
Educational organizations with a regular faculty and curriculum that
normally have a regularly enrolled student body attending classes on site.
*
Hospitals and certain medical research organizations associated with
these hospitals.
*
Publicly supported charities.
*
Private operating foundations.
*
Private nonoperating foundations that make qualifying distributions
of 100% of contributions within 2½ months following the year they receive
the contributions.
*
Certain private foundations whose contributions are pooled in a
common fund, the income and principal of which are paid to public charities.
30% Limit
A 30% limit applies to the following gifts.
*
Gifts to all qualified organizations other than 50% limit
organizations. This includes gifts to veterans' organizations, fraternal
societies, nonprofit cemeteries, and certain private nonoperating foundations.
*
Gifts for the use of any organization. However, if these gifts are of
capital gain property, they are subject to the 20% limit, described later,
rather than the 30% limit.
Student living with you. Amounts you spend on behalf of a student living
with you are subject to the 30% limit. These amounts are considered a
contribution for the use of a qualified organization. See Expenses Paid for
Student Living With You, earlier.
Special 30% Limit for Capital Gain Property
A special 30% limit applies to gifts of capital gain property to 50% limit
organizations. (For gifts of capital gain property to other organizations,
see 20% Limit, later.) However, the special 30% limit does not apply when
you choose to reduce the fair market value of the property by the amount
that would have been long-term capital gain if you had sold the property.
Instead, only the 50% limit applies.
Two separate 30% limits. This special 30% limit for capital gain property
is separate from the other 30% limit. Therefore, the deduction of a
contribution subject to one 30% limit does not reduce the amount you can
deduct for contributions subject to the other 30% limit. However, the total
you deduct cannot be more than 50% of your adjusted gross income.
Example.
Your adjusted gross income is $50,000. During the year, you gave capital
gain property with a fair market value of $15,000 to a 50% limit
organization. You do not choose to reduce the property's fair market value
by its appreciation in value. You also gave $10,000 cash to a qualified
organization that is not a 50% limit organization. The $15,000 gift of
property is subject to the special 30% limit. The $10,000 cash gift is
subject to the other 30% limit. Both gifts are fully deductible because
neither is more than the 30% limit that applies ($15,000 in each case) and
together they are not more than the 50% limit ($25,000).
For more information, see the rules for electing the 50% limit for capital
gain property under How To Figure Your Deduction When Limits Apply in
Publication 526.
20% Limit
This limit applies to all gifts of capital gain property to or for the use
of qualified organizations (other than gifts of capital gain property to
50% limit organizations).
Carryovers
You can carry over your contributions that you are not able to deduct in
the current year because they exceed your adjusted-gross-income limits. You
can deduct the excess in each of the next 5 years until it is used up, but
not beyond that time. For more information, see Carryovers in Publication 526.
Records To Keep
You must keep records to prove the amount of the cash and noncash
contributions you make during the year. The kind of records you must keep
depends on the amount of your contributions and whether they are cash or
noncash contributions.
Note. An organization generally must give you a written statement if it
receives a payment from you that is more than $75 and is partly a
contribution and partly for goods or services. (See Contributions From
Which You Benefit under Contributions You Can Deduct, earlier.) Keep the
statement for your records. It may satisfy all or part of the recordkeeping
requirements explained in the following discussions.
Cash Contributions
Cash contributions include those paid by cash, check, credit card, or
payroll deduction. They also include your out-of-pocket expenses when
donating your services.
For a contribution made in cash, the records you must keep depend on
whether the contribution is:
*
Less than $250, or
*
$250 or more.
Amount of contribution. In figuring whether your contribution is $250 or
more, do not combine separate contributions. For example, if you gave your
church $25 each week, your weekly payments do not have to be combined. Each
payment is a separate contribution.
If contributions are made by payroll deduction, the deduction from each
paycheck is treated as a separate contribution.
If you made a payment that is partly for goods and services, as described
earlier under Contributions From Which You Benefit, your contribution is
the amount of the payment that is more than the value of the goods and
services.
Contributions of Less Than $250
For each cash contribution that is less than $250, you must keep one of the
following items.
1.
A canceled check, or a legible and readable account statement that shows:
1.
If payment was by check: the check number, amount, date posted,
and to whom paid.
2.
If payment was by electronic funds transfer: the amount, date
posted, and to whom paid.
3.
If payment was charged to a credit card: the amount,
transaction date, and to whom paid.
2.
A receipt (or a letter or other written communication) from the
charitable organization showing the name of the organization, the date of
the contribution, and the amount of the contribution.
3.
Other reliable written records that include the information described
in (2). Records may be considered reliable if they were made at or near the
time of the contribution, and were regularly kept by you, or if, in the
case of small donations, you have emblems, buttons, or other tokens that
are regularly given to persons making small cash contributions.
Car expenses. If you claim expenses directly related to the use of your
car in giving services to a qualified organization, you must keep reliable
written records of your expenses. Whether your records are considered
reliable depends on all the facts and circumstances. Generally, they may be
considered reliable if you made them regularly and at or near the time you
had the expenses.
Your records must show the name of the organization you were serving and
the date each time you used your car for a charitable purpose. If you use
the standard mileage rate of 14 cents a mile, your records must show the
miles you drove your car for the charitable purpose. If you deduct your
actual expenses, your records must show the costs of operating the car that
are directly related to a charitable purpose.
See Car expenses, earlier, under Out-of-Pocket Expenses in Giving
Services, for the expenses you can deduct.
Contributions of $250 or More
You can claim a deduction for a contribution of $250 or more only if you
have an acknowledgment of your contribution from the qualified organization
or certain payroll deduction records.
If you made more than one contribution of $250 or more, you must have
either a separate acknowledgment for each or one acknowledgment that shows
your total contributions.
Acknowledgment. The acknowledgment must meet these tests.
1.
It must be written.
2.
It must include:
1.
The amount of cash you contributed,
2.
Whether the qualified organization gave you any goods or
services as a result of your contribution (other than certain token items
and membership benefits), and
3.
A description and good faith estimate of the value of any goods
or services described in (b). If the only benefit you received was an
intangible religious benefit (such as admission to a religious ceremony)
that generally is not sold in a commercial transaction outside the donative
context, the acknowledgment must say so and does not need to describe or
estimate the value of the benefit.
3.
You must get it on or before the earlier of:
1.
The date you file your return for the year you make the
contribution, or
2.
The due date, including extensions, for filing the return.
Payroll deductions. If you make a contribution by payroll deduction, you
do not need an acknowledgment from the qualified organization. But if your
employer deducted $250 or more from a single paycheck, you must keep:
*
A pay stub, Form W-2, or other document furnished by your employer
that proves the amount withheld, and
*
A pledge card or other document from the qualified organization that
states the organization does not provide goods or services in return for
any contribution made to it by payroll deduction.
Out-of-pocket expenses. If you render services to a qualified
organization and have unreimbursed out-of-pocket expenses related to those
services, you can satisfy the written acknowledgment requirement just
discussed if:
1.
You have adequate records to prove the amount of the expenses, and
2.
By the required date, you get an acknowledgment from the qualified
organization that contains:
1.
A description of the services you provided,
2.
A statement of whether or not the organization provided you any
goods or services to reimburse you for the expenses you incurred,
3.
A description and a good faith estimate of the value of any
goods or services (other than intangible religious benefits) provided to
reimburse you, and
4.
A statement of any intangible religious benefits provided to you.
Noncash Contributions
For a contribution not made in cash, the records you must keep depend on
whether your deduction for the contribution is:
1.
Less than $250,
2.
At least $250 but not more than $500,
3.
Over $500 but not more than $5,000, or
4.
Over $5,000.
Amount of deduction. In figuring whether your deduction is $500 or more,
combine your claimed deductions for all similar items of property donated
to any charitable organization during the year. If you received goods or
services in return, as described earlier in Contributions From Which You
Benefit, reduce your contribution by the value of those goods or services.
If you figure your deduction by reducing the fair market value of the
donated property by its appreciation, as described earlier in Giving
Property That Has Increased in Value, your contribution is the reduced amount.
Deductions of Less Than $250
If you make any noncash contribution, you must get and keep a receipt from
the charitable organization showing:
1.
The name of the charitable organization,
2.
The date and location of the charitable contribution, and
3.
A reasonably detailed description of the property.
Tip
A letter or other written communication from the charitable organization
acknowledging receipt of the contribution and containing the information in
(1), (2), and (3) will serve as a receipt.
You are not required to have a receipt where it is impractical to get one
(for example, if you leave property at a charity's unattended drop site).
Additional records. You must also keep reliable written records for each
item of donated property. Your written records must include the following
information.
*
The name and address of the organization to which you contributed.
*
The date and location of the contribution.
*
A description of the property in detail reasonable under the
circumstances. For a security, keep the name of the issuer, the type of
security, and whether it is regularly traded on a stock exchange or in an
over-the-counter market.
*
The fair market value of the property at the time of the contribution
and how you figured the fair market value. If it was determined by
appraisal, keep a signed copy of the appraisal.
*
The cost or other basis of the property if you must reduce its fair
market value by appreciation. Your records should also include the amount
of the reduction and how you figured it. If you choose the 50% limit
instead of the special 30% limit on certain capital gain property, you must
keep a record showing the years for which you made the choice,
contributions for the current year to which the choice applies, and
carryovers from preceding years to which the choice applies. See How To
Figure Your Deduction When Limits Apply in Publication 526 for information
on how to make the capital gain property election.
*
The amount you claim as a deduction for the tax year as a result of
the contribution, if you contribute less than your entire interest in the
property during the tax year. Your records must include the amount you
claimed as a deduction in any earlier years for contributions of other
interests in this property. They must also include the name and address of
each organization to which you contributed the other interests, the place
where any such tangible property is located or kept, and the name of any
person in possession of the property, other than the organization to which
you contributed.
*
The terms of any conditions attached to the gift of property.
Deductions of At Least $250 But Not More Than $500
If you claim a deduction of at least $250 but not more than $500 for a
noncash charitable contribution, you must get and keep an acknowledgment of
your contribution from the qualified organization. If you made more than
one contribution of $250 or more, you must have either a separate
acknowledgment for each or one acknowledgment that shows your total
contribution.
The acknowledgment must contain the information in items (1) through (3)
listed under Deductions of Less Than $250, earlier, and your written
records must include the information listed in that discussion under
Additional records.
The acknowledgment must also meet these tests.
1.
It must be written.
2.
It must include:
1.
A description (but not necessarily the value) of any property
you contributed,
2.
Whether the qualified organization gave you any goods or
services as a result of your contribution (other than certain token items
and membership benefits), and
3.
A description and good faith estimate of the value of any goods
or services described in (b). If the only benefit you received was an
intangible religious benefit (such as admission to a religious ceremony)
that generally is not sold in a commercial transaction outside the donative
context, the acknowledgment must say so and does not need to describe or
estimate the value of the benefit.
3.
You must get it on or before the earlier of:
1.
The date you file your return for the year you make the
contribution, or
2.
The due date, including extensions, for filing the return.
Deductions Over $500
You are required to give additional information if you claim a deduction
over $500 for noncash charitable contributions. See Records To Keep in
Publication 526 for more information.
Qualified Conservation Contribution
If the gift was a qualified conservation contribution, your records must
also include the fair market value of the underlying property before and
after the gift and the conservation purpose furthered by the gift. See
Qualified conservation contribution in Publication 561 for more information.
How To Report
Report your charitable contributions on Schedule A (Form 1040).
If your total deduction for all noncash contributions for the year is over
$500, you must also file Form 8283. See How To Report in Publication 526
for more information.
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