Is That Donation Deductible?

People don’t always make charitable donations because they are tax deductible. But if you do, you only have ten days left to report them on your 2022 income tax return. And it’s important to make sure that those donations are eligible for a tax deduction. 

Knowing when a donation is deductible isn’t always easy. There can be a lot of confusion about the meaning of terms like “qualified charity” and “donation”. To help clarify all that, we answer three questions about charitable donations and when they are tax deductible:

  1. What is a Qualified Charity?

Qualified charities include humanitarian, religious, educational, scientific, and cruelty-prevention organizations. Crowd funding, political contributions and association dues are not included. Except for religious organizations, qualified charities must apply for and be granted Tax Exempt Status by the IRS. Tax Exempt organizations have annual IRS reporting requirements. A list of qualified charities is posted in the IRS’ “Tax Exempt Organizations Search” tool at https://www.irs.gov/charities-non-profits/tax-exempt-organization-search.

  1. What is a Donation?

Donations can be financial or non-financial items such as clothing, household goods, vehicles, stock, or real estate. Financial donations to a qualified charity are a deductible, reduced by the value or anything received in exchange, such as a meal. In general, clothing and household items can only be deducted if they are in good usable condition. The deduction amount is based on the “thrift shop” value. Donated vehicles, art work and other non-financial donations valued at more than $500 are subject to more rules and limits.

  1. What Donations are Deductible?

Financial and non-financial donations must be acknowledged contemporaneously in writing by the charity. Acknowledgements reflect which organization received the donation and when to support any deduction taken. Donations of $250 or more must be supported by a letter from the charity stating the date and amount of the donation, the charity’s reduced by the value of anything in received by the donor in return, such as a fundraising dinner.

Many taxpayers to donate to charity, whether it’s deductible or not. But if that tax deduction is important to you, it’s important to know what donations are eligible for a tax deduction. Once you understand the terms, you’ll be all ready to report charitable donations on your 2022 income tax return. Want more details? The IRS website has them for you right here https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions.