By Ryan Velez
Charitable donations are supposed to be something that makes you feel good while doing good, but there is a practical side to taking the time to donate as well—tax write-offs. However, The Network Journal explains how the IRS has stringent procedures to make sure donations are legitimate, and you need to have your documents in order.
“The IRS is unforgiving on charitable contributions. If you don’t have the right pieces of paper, you don’t get the deductions,” says Bill Fleming, a managing director with accounting firm PwC. What do you need? It depends on the donation.
For cash gifts under $250, keep a canceled check, credit-card receipt, bank record or acknowledgment from the charity showing the date and amount of the contribution. Keep your pay stub showing any contributions you made through payroll deduction.
Above that number, hold on to a written acknowledgment from the charity including the amount and date of your contribution. “And the receipt has to have the magic words on it — ‘no goods or services were received,’ ” says Fleming.
He explains that if his clients made donations of more than $250 and have a thank-you note from the charity that doesn’t include those words, Fleming has them go back to the charity to get the extra documentation. The receipt has to be dated before the tax-filing deadline. The receipt from the charity is essential for gifts of more than $250, but Fleming also recommends keeping your canceled check, credit card receipt or bank statement showing the amount. “It’s a good idea to keep the check anyway because it will give you context about when you gave the donation, especially if you have to go back to the charity to get the receipt,” he says.
For noncash donations, it falls on you to determine the value, but you need to choose wisely. You can deduct the fair market value of the items, which is what you would get for the items based on their age and condition if you sold them. Some charities — such as the Salvation Army and Goodwill — have value guides that can help. (Your local Goodwill may also have a more-detailed value guide.) Fleming says you can take a picture of what you give away and make an itemized list prior to donating.