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Tax tip: substantiation of gifts of $250 or more per donee

Charitable deduction

A smart way to stretch your charitable dollar is by claiming the income tax charitable deduction for donations. The donations must be made to a qualified charitable organization.

Substantiation requirements

You must be able to substantiate your contribution.  The record keeping required by the IRS depends on the amount of your contribution. At their most basic, the IRS substantiation rules for the charitable deduction are as follows:

Gifts of less than $250 per donee — you need a cancelled check or receipt

$250 or more per donee — you need a timely written acknowledgement from the donee

Total deductions for all property exceeds $500 — you need to file IRS Form 8283

Deductions exceeding $5,000 per item — you need a qualified appraisal completed by a qualified appraiser

Gifts of $250 or more per donee

Let’s focus for today on gifts of $250 or more per donee. Specifically, the income tax charitable deduction is not allowed for a separate contribution of $250 or more unless the donor has written substantiation from the donee of the contribution in the form of a contemporaneous written acknowledgement.

The $250 threshold

Note this $250 threshold is applied to each contribution separately. So, if a donor makes multiple contributions to the same charity totaling $250 or more in a single year, but each gift is less than $250, written acknowledgment is not required. [Unless the smaller gifts are related and made to avoid the substantiation requirements].

Written acknowledgment

The written acknowledgement must indicate:

1. the name and address of the donee;

2. the date of the contribution;

3. the amount of cash contributed;

4. a description of any property contributed;

5. whether the donee provided the donor any goods or services in exchange for the contribution; and, if so;

6. a description, and a good faith estimate, of the value of the good or services provided or, if the only goods or services provided were intangible religious benefits, a statement to that effect.

Contemporaneous acknowledgement

The IRS definition of contemporaneous is that the acknowledgment must be obtained by the donor on or before the earlier of [1] the date the donor files the original return for the year the donation was made; or [b] the return’s extended due date. A donor cannot amend a return to include contributions for which an acknowledgment is obtained after the original return was filed.

Responsibility lies with the donor

Interestingly, the responsibility for obtaining this documentation lies with the donor. The donee is not required to record or report this information to the IRS on behalf of the donor.

Gordon Fischer Law Firm, P.C. is dedicated to promoting and maximizing charitable giving in Iowa. Gordon can be reached by phone at 515-371-6077; by email at gordon@gordonfischerlawfirm.com; and through his website at www.gordonfischerlawfirm.com.

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