Which Donations are Tax-Deductible?
Which donations are tax-deductible depends on the country where a person or business is operating, and regulations in different nations can change over time. Generally, legitimate donations are those that do not benefit the donor, have records for verification and hold a set fair market value. Charitable donations to churches, synagogues, temples and other religious entities typically can be written off, as can those made to nonprofit hospitals, schools, public parks, veteran organizations and similar groups. People can deduct government donations, as well, as long as the gifts are intended to be used for a public purpose.
Deductions Around the World
Specific regulations regarding the amounts of allowable deductions and types of charitable organizations vary from country to country. No central database exists that shows the regulation of each nation, so if an individual wants to know what is possible for different countries, he must look up the current information specific to those regions. Many governments present information about how to handle donations on the website of the organization that processes taxes. Comparing the information from these sites is challenging due to tax system differences, even when the data is available.
Tax codes are not necessarily static. Based on the needs of a government or the views of people in a country, legislators can choose to modify the tax regulations, including sections of the tax codes related to donations. These changes do tend to happen slowly over time, but they occur frequently enough that it is not a good idea to assume that the regulations for the previous year still apply for the current year’s taxes. Codes can be confusing, so someone who made a significant number of donations that he plans to deduct may want to consult a tax professional.
Benefit to Donor
In general, tax deductible donations must be given voluntarily and cannot provide a material benefit to the donor. A donation given in exchange for something else, such as raffle tickets, memberships or merchandise, for example, would benefit the giver, so an individual could not deduct it. If the amount of the donation was more than the value of the merchandise or service received, however, a portion of the donation could still be written off.
Fair Market Value
Typically, governments look at the fair market value of the items donated to determine the amount a person can deduct. Fair market value refers to how much someone currently is willing to pay to get the item from a seller, assuming that both the seller and buyer are well informed. This amount matters because governments often only allow deductions up to a certain percentage of the company or individual’s income, and those filing their taxes have to be able to determine whether they have reached the deduction cap.
A general rule of thumb with any tax issue is that a person or company needs to be able to prove that the statements and figures listed on the tax forms are true or accurate. This requires the business or individual to keep documentation related to the donation, such as a simple receipt. If an agency or person cannot produce this documentation, the item might not be deductible.
Tax-Exempt Status in the US
In the United States, only donations given to tax-exempt organizations are tax deductible, although this status is not enough to signal deductibility. To determine if donations to an organization can be written off, a person must look to the Internal Revenue Service (IRS).
Donations to Internal Revenue Code 501(c)(3) organizations are usually tax deductible. These groups include public charities, private foundations and private operating foundations. In such cases, a person is allowed to deduct donations that amount to 50% or less of his adjusted gross income.
With private foundations, an individual typically can deduct donations that equal 30% or less of his adjusted gross income. When corporations make donations, they are subject to different rules. A corporation may deduct total donations equaling 10% or less of its taxable income, regardless of the receiving organization's foundation status.
Contributions to 501(c)(4) organizations are typically not deductible because they are not considered charitable donations. The IRS does consider such donations as business expenses, however, so companies can deduct these payments along with other eligible business expenses. 501(c)(4) organizations include those that focus on social welfare tasks, as well as those that concentrate on lobbying to legislative entities.
Charitable donations to 501(c)(6) organizations typically cannot be written off. A company may deduct them as business expenses if they are necessary for running the business, however. Organizations that fall into this group include chambers of commerce, trade associations and similar entities.
Donations made to tax-exempt organizations outside the United States typically cannot be deducted, although there are some exceptions. Donations to certain organizations in Canada, Israel and Mexico may be deductible, for example. It's best for a donor to talk to the IRS or a tax professional to verify which organizations are included in this group.
I am in a band, organized as an LLC partnership. We are often asked to play benefits for 501(c)(3) organizations. If we got a letter from the organization stating the value of our contribution (saying that we normally charge $x for a private event but that that service was donated) is that deductible somehow on our tax return?
Can a gym donate memberships for our fundraiser auction and deduct that from their revenue?
Why is Israel the only non-North American state that benefits American citizens with tax-deductions for donating to its charities?
I'm sponsoring a child through a non profit organization in the US. I know that's a tax deduction because I get a receipt for the monetary value. But if I'm purchasing items to ship to the charity's headquarters, that is in a different country (where my sponsored child lives). Is that a charitable donation I can deduct?
All I have are the receipts for the purchases from the stores (mostly toys and clothes), receipts from the post office with the country these are shipping to and an itemized customs claim with the charity's address. I know I will not receive an itemized list from them with monetary values. I have pictures and letters with general confirmation of the gifts.
I can give the same amount of money to the charity in u.s. to wire it to my child's community abroad (and have it show up on my donation receipt) but I chose to spend the money here to boost economy and just mail the product abroad. Does it count as a deduction?
If a school sells 10 raffle tickets to 10 people for $100 each, for a chance to win nine cakes, can the person who did not win a cake claim his $100 raffle ticket as a charitable contribution on his taxes?
It appears that, in the instructions for completion of form 1023 that "Any organization that has gross receipts in each taxable year of normally not more than $5,000... May be considered tax exempt under section 501(c)3 even if they do not....receive a determination letter that recognizes their section 501(c)3 status."
My question is, how do I determine if my organization is definitely exempt? "May be" doesn't quite cut it. And if my organization is in fact exempt without the determination letter, is my organization allowed to provide contributors with tax deductible receipts. I appreciate any feedback you have but am truly looking for supporting IRS documentation for any answers provided.
What percentage of a product donation is a business able to claim for tax purposes? Is it fair market value of the products?
donations to an individual are not tax deductible. donations to a 501c3 earmarked for an individual are not tax deductible.
If you think about it, this is would be no different from a parent paying college tuition for their kid and those aren't considered tax deductible donations.
Can a 501(c)3 donate to a municipality?
Is a donation tax deductible if it is to a ministry that is not and will not be a 501(c)(3)?
What percentage of your income (private) are you allowed to donate and claim on you taxes?
Is a political donation made to party outside SA deductible?
Can a donation to an organization in the process of obtaining their 501c3 be deducted? The organization has submitted their application but is waiting for approval.
Answers to questions:
1. - No.
2. - Incidental expenses, yes. Generally, no.
3. - A value of the video must be determined. Only the amount received in excess of the value of the video is deductible.
A receipt for contributions to a church generally includes the explanation that the only thing received for the donation was religious benefits.
4 - No.
5 - No, and Yes only if the fund has qualified as a 501(c)(3) organization.
If you pay the expenses to bury a relative (non-spouse), can you deduct that amount as a charitable contribution?
Is a donation made to a fund at the time of a person's death tax deductible? The donation to the fund were requested in lieu of other tributes and were used to defray the costs of the funeral. Does your relationship to the deceased make a difference?
Could tax-deductible donations constitute hidden bribes for a non-profit organization such as a school?
Please let me know if donations by companies to an individual suffering from cancer is tax deductible. Thank you for your help. Lynn from MN
Questions: I am in the process of starting a new ministry. And currently working on fein and bylaw, constitution etc. we have a video ministry and we ask for donations of say for instance $3 to $4 only if someone orders them and gives a donation to the church is this tax deductible for the church or for the member or both?
If a company pays for all event expenses directly that are normally paid for by the nonprofit, can the company claim those expenses as a tax deductible donation if they provide the receipts for the expenditures?
Is a donation to a pastor given to the church but designated to be paid to a pastor or other church family member tax deductible?
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