After the onslaught of Black Friday advertising and Cyber Monday announcements filling up your inbox, Giving Tuesday (November 28) feels like a breath of fresh (wintery) air from the shopping rush. The “holiday,” often known by its social media tag of #GivingTuesday, is all about celebrating generosity and philanthropy. Giving charitably to your favorite organizations feels great and allows you to make a difference in your community, state, and the world. But, you also want to make sure your gift is legally compliant and beneficial when it comes to the charitable deduction on federal income taxes.
Before you donate on #GivingTuesday (or any other day) consider these legal tips:
Make Sure the Charity is Qualified
A charitable deduction can result in significant tax savings, but for that to occur, the donation must be made to a qualified 501(c)(3). While that may sound basic, some initiatives may look like nonprofits but actually operate as a business, not a tax-exempt organization. A little bit of research can go a long way here. First, read up about the organization in question online and don’t hesitate to call to speak to a representative. You can also use the IRS’ Exempt Organizations Select Check; limit the search to organizations eligible for tax-deductible charitable contributions.
(If your favorite organization is in need of assistance for obtaining tax-deductible status, don’t hesitate to reach out.)
Proper documentation is required in order to take the charitable contribution deduction for contributions of $250 or more. This means you need written acknowledgement that expresses the required info of the donee (charity), date of donation, and monetary amount. It’s your legal obligation as the donor to ask for the written acknowledgement, not the charity’s obligation to offer it.
Here’s a simple breakdown of what’s needed for specific types of giving-
- 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
Need more info? I go into detail in this blog post.
Restrict in Writing
If you feel strongly about a specific program, region of operation, or use within the nonprofit, you’ll want to restrict the charitable donation. The restriction must be made in writing, at the same time as the donation is made.
#GivingTuesday has expanded greatly since its founding in NYC to become a global event. You may hold a foreign-based charitable organization near and dear to you heart and, of course, you may give to that organization, however your donation won’t qualify for a charitable tax deduction.
I work with my estate planning clients on defining their goals for their future and assets. The same baseline advice applies to charitable giving—what are your goals? Do the organizations you’re donating to support your giving goals? Look at materials published by One way to gauge this is by reviewing the nonprofit’s annual information on its Form 990, “Return of Organization Exempt From Income Tax.” This form is intended for the public and includes important financial info. The IRS publishes Form 990 and it’s easy to check out the details on Guidestar, a nonprofit database.
If you have any questions on how to give charitably and do so wisely, don’t hesitate to reach out. Maximizing charitable giving in Iowa is the mission of Gordon Fischer Law Firm and we want to help as many Iowans give confidently as we can.