Deadline for making tax-deductible donations is days away. Here's what to know
As "Giving Season" comes to a close, there are only a few days left in the year for folks — specifically donors — to reap the benefits of charitable donations.
Historically, the last two months of the year, often referred to as the "Giving Season," are when charitable giving is most popular. Though this time of the year, around the holidays, has tended to be when folks feel the most generous, the federal government's creation of the tax-exempt sector in the 20th century helped solidify this.
In 1917, the federal government established the Revenue Act, which introduced individual income tax deduction for charitable donations. Coming in all shapes and sizes, charitable donations are monetary or property gifts made to a nonprofit organization for which the donor receives nothing in return.
That being said, individuals can make donations that are deductible from federal tax returns, which reduces the amount of an individual's income that is subject to income tax. This may mean the individual will receive a tax refund (money back), if the deduction is large enough.
How much can an individual deduct from charitable donations?
Charitable tax-deductions are limited to up to 60% of a taxpayer's adjusted gross income, an individual's total income throughout the year, according to Investopedia, an online financial media resource.
What organizations qualify for tax deductions?
Organizations must be 501(c)(3) tax-exempt in order for donors to receive a deduction on their taxes.
Qualifying organizations include a trust, community chest or foundation that is operated exclusively for charitable, religious, scientific, literary or education purposes, according to Investopedia. Specific examples include synagogues, mosques and churches, veteran organizations, civil defense organizations, domestic fraternal societies and nonprofit cemeteries.
To ensure an organization qualifies, use the IRS's Tax Exempt Organization Search Tool. This online search engine allows users to search organizations by their name or Employer Identification Number (EIN).
The IRS also offers an online quiz called, "Can I Deduct My Charitable Contributions?" that allows folks to see if the donations they've made are tax-deductible. According to the IRS website, the quiz takes about 12 minutes to complete.
Non-cash donations are eligible for tax deductions
While monetary donations are the most common, non-monetary, or non-cash, donations are also eligible for tax-deductions.
Non-monetary donations may include clothing and household items donated to thrift/resale stores like Goodwill, Salvation Army and in Springfield, stores like Red Racks DAV Thrift Store. These donated items must be in good, usable condition. The deduction amount is limited to an item's fair market value, which is how much it is worth at the time of its donation. Deductions are not equivalent to how much the item cost originally.
When dropping off donations at thrift/resale stores, ask for a tax-deduction receipt for record keeping.
Understand the difference of a 'quid pro quo' donation
"Quid pro quo" donations are those in which a donor receives a benefit in return for a donation. An example of a benefit is a t-shirt.
When it comes to "quid pro quo" donations, tax deductions are limited to the amount of the contribution that exceeds the fair market value of the benefit. Investopedia gives the example that if an individual donates $40 to an organization and receives a t-shirt with a $20 fair market value, the deductible amount is $20.
How do you claim tax deductions?
To claim charitable giving as a tax deduction, a donor will need to itemize their deductions and complete a Schedule A (Form 1040) when filing their federal income taxes.
Keeping detailed records of your donations is important for the Schedule A (Form 1040).
For monetary donations, save bank and debit/credit card statements along with any receipts from the organizations that show dates, amounts donated and names of the organizations. If donations are automatically pulled from your payroll, save payroll deduction records.
For donations over $250, the IRS requires donors to receive a written letter of acknowledgement from the organization they donated to. This letter must indicates how much money was donated, if the donor received anything in return for the donation ("quid pro quo") and the estimated value of goods donated (if other than a monetary donation).
For non-monetary donations, Investopedia recommends saving the following records:
Less than $250: A receipt from the organization that displays the organization's name, the date and location of the donation, and a description of the donation;
Between $250-$500: Written letter of acknowledgement from the organization that includes a description of the donation, whether the donation was "quid pro quo" and a description of the donation's fair market value;
Between $500-$5,000: Written letter of acknowledgement from the organization that includes a description of the donation, whether the donation was "quid pro quo," a description of the donation's fair market value and a Form 8283, which is used for non-cash charitable contributions;
More than $5,000: Written letter of acknowledgement, a Form 8283 and a written appraisal of the donations from a qualified appraiser.
Is volunteering tax-deductible?
The act of volunteering itself is not tax-deductible but some expenses related to volunteering are.
The most common tax-deductible expense is gas mileage, including the mileage it took for a volunteer to drive to a charity event or other volunteer opportunities, according to NerdWallet, an online personal finance resource. If you plan on claiming mileage as a tax deduction, save all gas receipts.
Instead of saving receipts, volunteers may also use the standard mileage deduction, which is an across-the-board deduction for volunteer mileage. For 2023, the standard mileage deduction is 14 cents per mile when traveling for charitable volunteerism, according to NerdWallet. The deduction will be the same in 2024.
Mileage, and other expenses related to volunteering, must be directly connected to the volunteer work completed.
Are GoFundMe donations tax-deductible?
Generally, donations made to GoFundMe campaigns are not tax-deductible. This is because these campaigns are not organized by a qualifying organization. These donations are considered "personal gifts."
GoFundMe-sponsored charity fundraisers, on the other hand, are tax-deductible. On a charity fundraiser, the name of the charity will be listed next to the name of the organizer.
Folks who donate to GoFundMe-sponsored charity fundraisers will receive tax receipts from GoFundMe's charity partner, PayPal Giving Fund, not GoFundMe itself, according to the GoFundMe website.
When is the deadline for making tax-deductible donations?
Although the federal deadline for filing a federal income tax return is not until April 15, 2024, if you wish to make a tax-deductible donation, the deadline is Dec. 31, 2023.
What this deadline looks like varies per donation type:
Check: The day the check was mailed, not received;
Electronic payment: The day the charge was made or processed, not when the bill was paid.
Greta Cross is the trending topics reporter for the Springfield News-Leader. Follow her on X and Instagram @gretacrossphoto. Story idea? Email her at gcross@gannett.com.
This article originally appeared on Springfield News-Leader: How to make tax-deductible charitable donations this year
