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Peacock & French CPAs
Nov 01, 2024

For those who want to ensure their donations are tax-deductible, it’s essential to understand the IRS guidelines. Not all donations will qualify, so keep reading to learn how you can confirm that your holiday contributions can be deducted on your taxes.

With the holiday season just around the corner, many people feel inspired to give back. As Thanksgiving approaches, it’s common to look for ways to support charities and give to causes that matter. But for those who want to ensure their donations are tax-deductible, it’s essential to understand the IRS guidelines. Not all donations will qualify, so let’s explore how you can confirm that your holiday contributions can be deducted on your taxes.

Confirm the Organization's Tax-Exempt Status

The IRS only allows deductions for contributions made to qualified tax-exempt organizations. You can verify this by searching for the organization on the IRS’s Tax Exempt Organization Search tool, which is available on the IRS website. Charities that are eligible will have a 501(c)(3) status, meaning they are officially registered as tax-exempt nonprofit organizations. Be cautious of organizations that claim to be nonprofit but do not have IRS approval.

Understand the Types of Contributions That Qualify

Not all types of contributions are eligible for deductions. Donations can include money, property, or other goods, but the IRS has strict guidelines on what qualifies.

Types of eligible contributions include:

• Cash or Checks: Monetary donations are generally deductible.
• Property Donations: Non-cash contributions such as furniture, clothing, and vehicles are often deductible, but you’ll need to estimate their fair market value accurately.
• Volunteer Expenses: While the IRS does not allow deductions for the value of time spent volunteering, some out-of-pocket expenses related to volunteer work, such as travel, supplies, or mileage, may be deductible.

Keep Proper Documentation for Each Donation

To claim a deduction, you’ll need to provide documentation to verify your donation. The IRS requires different forms of documentation based on the amount of the contribution. Here are some documentation tips that might help:

• For cash donations under $250, a bank record, canceled check, or receipt from the organization suffices.
• For donations over $250, request a written acknowledgment from the organization with the donation amount and a statement indicating whether you received any goods or services in return.
• For property or goods donations, maintain an itemized list and, if the donation exceeds $5,000, consider obtaining a qualified appraisal.

Avoid Charitable Gifts That Don’t Qualify

Some contributions, while generous, are not eligible for deductions under IRS guidelines. These include any portion of a contribution that benefits you personally or donations to certain types of organizations. Here are a few examples:

• Political Donations: Contributions to political campaigns, parties, or action committees are not deductible.
• Value of Raffle Tickets: While many charities host fundraising events with raffles or auctions, the cost of raffle tickets is not deductible.
• Gifts for Which You Receive Goods or Services: If you receive something in exchange for your donation, only the amount exceeding the fair market value of that item is deductible.

Know the Annual Deduction Limits

While charitable contributions are deductible, the IRS limits the amount you can deduct each year based on your adjusted gross income (AGI). Generally, donations up to 60% of your AGI can be deducted if the donations are in cash. Limits for property donations and contributions to certain organizations may differ. Cash contributions to public charities are typically limited to 60% of your AGI. Donations of appreciated assets, like stocks, are limited to 30% of AGI.

Make Sure Your Donation Is in by December 31

For your holiday-season donations to be deductible on your 2024 tax return, the contribution must be made by December 31. Even if you’re using a credit card, the deduction counts as long as the donation is processed within the calendar year.

Confirm Your Deduction Eligibility Early

By understanding these IRS guidelines, you can be sure that your holiday donations will have the intended impact—both for the charity and for your tax return. Confirm the charity’s status, keep all documentation, and avoid contributions that don’t qualify. If you need help verifying an organization’s tax-exempt status or understanding which contributions qualify, consider consulting a professional tax advisor.

Let this season of giving be both rewarding and smart for your finances! If you have questions or need assistance, reach out to Peacock & French CPAs to make the most of your holiday giving and year-end tax planning.