Kelly Bullis: Rules on charity contributions

Not everybody makes large charity contributions. If you are in the group that does, keep reading.

For many, charity contributions can be the largest deduction on their return, which is why the IRS pays such close attention to this topic. Because the IRS targets large charitable donation-related tax returns, it is in your best interest to follow the law very closely, or you run the risk of having your deduction disallowed.

For cash contributions, your documentation must include: 1. The amount 2. The date 3. The name of the charity 4. Must be able to prove you made the contribution by showing bank or credit card transaction on statement 5. If the total contributions in the aggregate for the year exceed $250, you must also have a written statement from the charity.

Here is some additional information that the IRS just loves to disallow contributions over this simple thing. A statement from a charity must say “no goods or services were received for your contribution.” If your statement doesn’t have that on it, you will not be allowed to deduct your contribution. The IRS is pretty cold-hearted about this.

If you actually did receive something in exchange, the charity statement must go further. It must state the value of the items received and reduce the deductible amount by that.

Example: You and your spouse attend a fundraising dinner, sponsored by a charitable organization. The tickets to the event cost $500 each, but the dinner is valued at $100 each. You can deduct $800 out of a total of $1,000.

If you only received minor token goods, minimal services or intangible religious benefits in exchange, then a written statement from the charity is not required.

When you give property instead of cash, if it is valued under $500, you do not even need a receipt. Think of all those minor boxes of stuff you dropped off at FISH or Salvation Army over the year.

If your non-cash gift is over $500, you need a receipt just like a cash receipt, stating all the same details, plus, 1. How you acquired the property 2. The approximate date you acquired the property 3. Your original cost a general description of the property given. 4. If the value of the property given exceeds $5,000, you must have an independent written appraisal done before you file your return.

You get to deduct what you paid for the stuff, or if you held it for longer than one year, you use its fair market value.

Have you heard? Prov 25:14 says, “As clouds and wind without rain, so is he who boast of gifts deceptively.”

Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. On the web at BullisAndCo.com. Also on Facebook.