Substantiation may be required when making charitable contributions and the requirements depend on the nature of the donation. If the contribution is $250 or more, you will need a written receipt from the charity. If you donate property valued at more than $500, additional requirements apply. Here are the details:
General rules. For a contribution of cash, check, or other monetary gift, regardless of amount, you must maintain a bank record or a written communication from the donee organization showing its name, plus the date and amount of the contribution. Any other type of written record, such as a log of contributions, is insufficient.
For a contribution of property other than money, you generally must maintain a receipt from the donee organization that shows the organization’s name, the date and location of the contribution, and a detailed description (but not the value) of the property.
If the contribution is worth $250 or more, stricter substantiation requirements apply. No charitable deduction is allowed for any contribution of $250 or more unless you substantiate the contribution with a written receipt from the donee organization. You must have the receipt in hand when you file your return or you won’t be able to claim the deduction. If you make separate contributions of less than $250, you won’t be subject to the written receipt requirement, even if your contributions to the same charity total $250 or more in a year.
The receipt must set forth the amount of cash and a description of any property other than cash contributed. It must also state whether the donee provided any goods or services in return for the contribution, and if so, must give a good-faith estimate of the value of the goods or services.
For donated property with a value of more than $5,000, you are generally required to obtain a qualified appraisal and to attach an appraisal summary to the tax return.
Recordkeeping for contributions for which you receive goods or services. If you receive goods or services, such as a dinner or theater tickets, in return for your contribution, your deduction is limited to the excess of what you gave over the value of what you received.
If you made a contribution of more than $75 for which you received goods or services, the charity must give you a written statement, either when it asks for the donation or when it receives it, that tells you the value of those goods or services. Be sure to keep these statements.
Substantiating out-of-pocket costs. Although you can’t deduct the value of services you perform for a charitable organization, some deductions are permitted for out-of-pocket costs you incur while performing the services. You should keep track of your expenses, the services you performed and when you performed them, and the organization for which you performed the services. Keep receipts, canceled checks, and other reliable written records relating to the services and expenses.
As discussed above, a written receipt is required for contributions of $250 or more. This presents a problem for out-of-pocket expenses incurred in the course of providing charitable services, since the charity does not know how much those expenses were. However, you can satisfy the written receipt requirement if you have adequate records to substantiate the amount of your expenditures, and get a statement from the charity that contains a description of the services you provided, the date the services were provided, a statement of whether the organization provided any goods or services in return, and a description and good-faith estimate of the value of those goods or services.
About the Author
Jonathan Louie, CPA, MST, Director
Tax, Real Estate, 1031 Exchange
Jonathan is a Tax Director at KROST. Jonathan has over 14 years of experience in public accounting. Jonathan’s areas of expertise include federal and multi-state tax compliance and consulting for high net worth individuals, partnerships, and corporations. He services clients in various industries including but not limited to the Real Estate, Restaurant, medical, and Entertainment industries. » Full Bio