CARL WATTS & ASSOCIATES

December 01, 2014

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Year-End Gifts to Charity
Donations to charity are especially common this time of year, as winter holidays are closing in. While we know that charity alone moves your heart to make donations to the less fortunate and favored of the world, we would also like to remind you that you can claim tax deductions for your charity gifts.

First of all, remember that, if you want to claim a tax deduction for your gifts, you must itemize your deductions. This deduction is not available to those who choose the standard deduction. This includes anyone who files a short form (Form 1040A or 1040EZ).


You will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2014 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.

The amount you can deduct for charitable contributions cannot be more than 50% of your adjusted gross income. Your deduction may be further limited to 30% or 20% of your AGI, depending on the type of property you give and the type of organization you give it to. A higher limit applies to certain qualified conservation contributions.

The 50% limitation applies to:

  • All public charities,
  • All private operating foundations,
  • Certain private foundations that distribute the contributions they receive to public charities and private operating foundations within 2-1/2 months following the year receipt, and
  • Certain private foundations the contributions to which are pooled in a common fund and the income and corpus of which are paid to public charities.

The 30% limitation applies to private foundations, other than those previously mentioned that qualify for a 50% limitation, and to other organizations that do not qualify for the 50% limitation, such as domestic fraternal societies.


There are more tax rules that you should also know about before you give. Here are some tips that the IRS would advise you to keep in mind:

Qualified charities. You can only deduct gifts you give to qualified charities. Use the IRS Select Check tool to see if the group you give to is qualified. Remember that you can deduct donations you give to churches, synagogues, temples, mosques and government agencies. This is true even if Select Check does not list them in its database.
The organizations listed in the IRS publication with foreign addresses are generally not foreign organizations but are domestically formed organizations carrying on activities in foreign countries. These organizations are treated the same as any other domestic organization with regard to deductibility limitations.

Monetary donations.  Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.


Household goods.  Household items include furniture, furnishings, electronics, appliances and linens. If you donate clothing and household items to charity they generally must be in at least good used condition to claim a tax deduction. If you claim a deduction of over $500 for an item it doesn’t have to meet this standard if you include a qualified appraisal of the item with your tax return.

Records required.  You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.

If your combined contributions for the year are over $500, you'll need to file Form 8283 with your taxes; for non-cash contributions worth over $5,000, you need a written appraisal.

Year-end gifts.  You can deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2014. This is true even if you don’t pay the credit card bill until 2015. Also, a check will count for 2014 as long as you mail it in 2014.

Special rules. Special rules apply if you give a car, boat or airplane to charity. The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale.

This rule applies if the claimed value is more than $500. Form 1098-C or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.

You cannot deduct the amount of any contribution for which you receive a corresponding personal benefit.

You should also know that charity donations are subject to some of the most common tactics used for fraudulent schemes, such as:

  • Claiming to be with real charities to gain public trust;
  • Using names similar to legitimate charities;
  • Using email to steer people to bogus websites that often look like real charity sites;
  • Contacting people by phone or email to get them to ‘donate’ money or give their financial information. 

Bogus websites may solicit funds for disaster victims. Such fraudulent sites frequently mimic the sites of, or use names similar to, legitimate charities, or claim to be affiliated with legitimate charities in order to persuade members of the public to send money or provide personal financial information that can be used to steal identities or financial resources. Additionally, scammers often send e-mail that steers the recipient to bogus websites that appear to be affiliated with legitimate charitable causes.

Regardless of the tax benefits, charitable gifts are always a welcome, feel-good part in everybody’s life, nevertheless, charitable contributions can get complicated, therefore, for any of the situations mentioned above, be sure to consult a tax professional.

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