Will Your Holiday Donations Be Tax Deductible? Here's How to Tell

Peacock & French CPAs
Nov 01, 2022

How do you know if your donation will be tax deductible? Keep reading to learn a few things you should be aware of that will help you to know whether or not your holiday donations will be tax deductible.

Donating to charities is a common practice among Americans during the holiday season. While most aren’t doing it solely for the purpose of receiving a tax deduction on their next return, this certainly is a nice little benefit to your generosity. But how do you know if your donation will be tax deductible? Keep reading to learn a few things you should be aware of that will help you to know whether or not your holiday donations will be tax deductible.

Thoroughly Research the Charity

Regardless of whether you’re hoping to write off your donations or not, it’s always a good idea to thoroughly research any charity you’re unfamiliar with before you donate. Charity scams are out there, especially after disasters and during the holidays, so be wary. These false charities can be quite convincing, with professional-looking websites and credible-sound phone calls, so here are a few red flags to watch out for that will indicate the charity is actually a scam:

  • They can’t provide a clear answer on how your funds will be used. For example, if they say, “Your donation will help house families in hotels near the children’s hospital, so they can stay near their child during cancer treatment,” this is a clear and detailed answer. If they answer with something vague like, “It will help families who can’t afford cancer treatment for their children,” you should exercise extreme caution.
  • They call at odd hours and/or use a prerecorded message. Legitimate charities are require to follow specific rules when reaching out to potential donors. Those rules include not using robotic calls and not calling either before 8:00 in the morning or after 9:00 at night. If you receive a call from a supposed charity outside of these hours, or if they use a recorded message when you pick up, hang up immediately.
  • The request donations in an unusual manner, such as gift cards or wire transfers. These types of payments are very difficult to track, so they’re a popular choice among scammers

Once you’ve established that the charity you’re donating to is legitimate, don’t automatically assume that means your donation will be tax exempt. There are still a few more things you’ll need to check.

Check the Tax Exempt Organization Registry

In order for a donation to be deductible on your tax return, it must be given to a registered tax-exempt organization. The IRS has a public registry that lists all organizations that are verified non-profits, so you should check this list any time you want to ensure that your donations are tax exempt. Additionally, checking this list is another way to vet the charity is a legitimate one; a fake charity will not be registered with the IRS.

Bear in mind that not being registered with the IRS does not automatically mean the charity is a scam. There are many legitimate charities that aren’t tax-exempt organizations. However, it does mean that you won’t be able to deduct donations to that organization on your return.

Donate Cash, Stocks, or Goods

This may seem like an unnecessary statement, but unfortunately, many people are under the impression that volunteer hours should qualify for a tax deduction. While your time certainly has value to you, it doesn’t have a measurable value in terms of your taxes, so you cannot deduct the time that you spend volunteering when you file. Deductible donations include cash, stocks, property, and other physical goods (clothes, toys, books, etc.). You can also deduct mileage driven on behalf of a charity, based on current per-mile deduction rates.

Keep Detailed Records of Donations

If you do want to deduct your donations on your tax return, it’s important to keep the receipts and records of those contributions in an organized manner. You should be able to request a receipt from whatever organization you’re donating to and keep it in your files for use when completing your tax return. Not only does this help you ensure you’re calculating your deduction correctly, but it can also be used to prove that you qualified for the deduction, should you be selected for an IRS audit.

If you’re deducting mileage driven for a charity, you will need to keep very detailed records regarding the starting mileage on your odometer, ending mileage after the trip, total miles, date of the trip, and the reason for it; this must be done for every trip separately, then totaled for your taxes.

Consult with a Tax Expert

Determining the deductibility of different types of donations can be more difficult than it seems. If you’re ever uncertain, contact Peacock & French CPAs to review your donations and find out how much of it will be deductible on your tax return. We can also help you with verifying that any planned donations during the holidays will be tax exempt.