Can I Deduct Gifts to Charities?

Giving to your church, or your favorite charity, whether in the form of money, items, or even your time, can indeed be rewarding. However, if you're wondering whether these contributions are tax-deductible, it depends on the form of your gift. 

Time Contributions 

First, the bad news: donations of time, no matter how valuable, are not deductible. But monetary and non-monetary donations may be. 

Deducting Monetary and Non-Monetary Gifts 

To deduct these gifts, you need to itemize deductions on Schedule A (Form 1040). If your total itemized deductions exceed your standard deduction, charitable contributions can then be deducted.  

• Cash Donations: Deductible up to 60% of your AGI, allowing a 5-year carryover for excess amounts. 

•  Non-Cash Donations: Generally limited to 50% of your AGI. Small donations (under $250 per year) require a receipt, while donations over $250 per year need detailed documentation. For gifts over $5,000, an appraisal is required. 

Documentation Tips 

For cash donations over $250, secure a written statement from the church or charity. Using traceable payments (checks or digital methods) also provides an audit-ready record. If you receive goods or services in exchange (e.g., a church dinner), deduct only the donation amount minus the value of the benefits received. 

For non-cash donations over $250, create an itemized list of all the items to be donated. Take photos of the items to verify type and condition. Possibly get a letter from a thrift store or consignment store for an estimate of value. If the donation is over $5000, get an appraisal. Depending on where you make your donations, you may be able to get a letter from the charity for your donations.  

 Examples: 

 Paul and Lisa, a married couple, purchased tickets for a charity dinner hosted by the youth group at their church. The cost of the tickets is $100 each; the value of the dinner is $35 each. Bob and Lisa can deduct a contribution of $65 per ticket ($100 cost - $35 value of dinner received = $65) 

Leslie, a single taxpayer, moved during the tax year to a smaller home. As part of her effort to downsize, Leslie got rid of a lot of clothing, furniture, and household items. Leslie made five trips to her church to donate these items. For each trip, she estimates that the value of the items was $1,500. Individually, each donation was valued at less than $5,000, but the total value of the items (which are considered “similar” items) is greater than $5,000 (5 trips x $1,500 = $7,500); therefore, to take a deduction on her tax return, Leslie needs proof that she obtained an appraisal for all the items before donating them.  

 Keep all documentation on hand, especially for IRS audits, to ensure your giving benefits your taxes as much as your heart. If you are still unsure about your situation, and want expert advice, you can click this link to set an appointment to speak with a Tax Expert from Lisa Brugman, EA & Associates.