Forget trying to come up with an estimate for how much you dropped in the collection plate last year. Generosity has its benefits at tax time, but only if you have records to back it up.
The rules for deducting charitable contributions are stricter than they used to be, and the Internal Revenue Service now requires that charitable contributions be documented before you claim them as deductions.
"People don't realize you just can't give cash in a plate anymore," said Bob DiQuollo, an accountant and financial planner with Brinton Eaton Wealth Advisors in Madison, N.J. "You need receipts or you need a canceled check."
That goes for all donations, so there's no deducting those coins dropped in the Salvation Army bucket at holiday time.
For larger gifts, the rules get even more detailed.
DiQuollo said many people don't realize that if you write a check to a charity for more than $250, you need a letter from the organization that states how much it received and whether you got anything in return.
That means your winning bid at the charity auction can't be deducted, until the value of the classic rocker's guitar, autographed Super Bowl game ball or whatever else you won is subtracted from the total. And if you attended a benefit dinner, you can claim the ticket price minus the cost of the meal, which is information the organization should provide.
You are, however, allowed to deduct the full value of a donation if you received a token item in return, like a public TV station tote bag or a T-shirt from an environmental group.
For people who volunteer, there are a few opportunities to deduct costs associated with that service. But you can't deduct the value of your time, DiQuollo said.
You can deduct unreimbursed expenses related to volunteer work, like:
- Travel, including mileage, parking and tolls.
- Costs related to hosting a fundraiser or another event.
- Meals and hotels paid for while doing the work.
To claim volunteering expenses, you'll need records to back up what you deduct, like a plane ticket or hotel receipt, and a letter from the organization confirming that you did the work for them.
If you donated the use of property to a charity, there is no tax benefit, said Cindy Hockenberry, research director for the National Association of Tax Professionals. So if you gave up a week at your vacation house and allowed a charity to raffle it off, for instance, you can't deduct the rent you might have otherwise received.
Likewise, if you transferred a required minimum distribution from your IRA to a charity, there is no deduction. "Your benefit is you don't have to include the distribution as income," she said