Substantiating Charitable Gifts at Tax Time

by Sarah Weaver, JD
Director of Charitable Gift Planning & Legal Counsel

SUMMARY OF SUBSTANTIATION REQUIREMENTS FOR CHARITABLE GIFTS

Now that tax time is upon us, many clients are scrambling to find records of their charitable contributions. As professional advisors, you can assist your clients in tracking down all types of records for tax purposes. Looking to simplify your clients’ record-keeping for charitable gifts going forward? Encourage your clients to consider a donor-advised fund with CICF for their charitable giving. Rather than trying to track down receipts from the various organizations to which your clients donate, giving through a donor-advised fund allows clients to make one contribution (or several) to their fund at CICF, from which they can then grant to their favorite charitable organizations. In turn, record-keeping is simplified by receiving all required charitable tax documentation from CICF. We will also assist in navigating the donation of complex assets like real estate and closely-held business interests, including ensuring that all tax documentation requirements are met.

The type of substantiation required for charitable gifts depends on the amount and type of the gift. While charities are required to provide acknowledgments for every gift over $250 received, the ultimate burden is on the taxpayer to ensure that the acknowledgment has been received and contains the information required by the IRS.

Cash contributions include those paid by cash, check, electronic funds transfer, debit card, credit card or payroll deduction.

Cash contributions of less than $250 may only be deducted if substantiated by one of the following:

• A bank record showing the name of the qualified organization, the date of the contribution and the amount of the contribution. Bank records may include: a canceled check, a bank or credit union statement or a credit card statement.
• A receipt (or letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution and the amount of the contribution.
• Payroll deduction records must include a pay stub, form W-2 or other document furnished by the employer that shows the date and amount of the contribution and a pledge card or other document prepared by or for the qualified organization that shows the name of the organization.

For cash contributions of $250 or more, a deduction may be claimed for the contribution only with an acknowledgment from the qualified organization or certain payroll deduction records. For multiple contributions of $250 or more to the same organization, donors must have either a separate acknowledgment for each or one acknowledgment that lists each contribution, the date of each contribution and the total of all contributions. Only individual contributions of $250 or more must be acknowledged this way; separate contributions of less than $250 may be acknowledged as cash contributions of less than $250 set forth above.

Noncash Contributions: Records that must be kept for noncash contributions depend on the amount of the gift.

• Less than $250: A receipt, letter or other written communication from the charitable organization showing the name of the charitable organization, the date and location of the charitable contribution and a reasonably detailed description of the property, is required except where it is impractical to get one. Clients should also maintain their own written records of donated property with the following information: (1) name and address of the charitable organization; (2) the date and location of the contribution; (3) a description of the property; (4) the fair market value of the property at the time of the contribution and how fair market value was determined; (5) the cost or other basis of the property if its fair market value must be reduced by appreciation; (6) the amount claimed as a deduction for the tax year as a result of the contribution, if less than the entire interest in the property was contributed during the tax year; and (7) any conditions attached to the gift.
• At least $250 but not more than $500: In addition to the above, records must also include whether the qualified organization provided any goods or services as a result of the contribution (other than certain token items and membership benefits) and a description and good faith estimate of the value of any goods or services received as a result of the contribution. The acknowledgment must be received on or before the earlier of the date the return is filed for the year in which the contribution is made or the due date, including extensions, for filing the return.
• $500-$5,000: In addition to the above, records must also provide the date and manner in which the property was acquired or created and its adjusted basis.
• Over $5,000: in addition to the above, a qualified appraisal in compliance with Treasury Reg. 1.170A-13(c)(3) is required.

Quid pro quo

When a payment to a charity consists partly of a donation and partly in return for something of value, the amount of the taxpayer’s charitable donation is the amount of the payment less the amount attributable to the value received.  Such contributions over $75 must be acknowledged in writing and include a good faith estimate of the value of the goods or services provided to the donor.

For more on these requirements, see Treasury Reg. 1.170A-13.

Interested in helping your clients start a donor-advised fund with CICF to streamline charitable giving and eliminate the recordkeeping headache? Contact Sarah Weaver, director of charitable gift planning and legal counsel, on her cell phone at 615.513.3897 or by email at SarahW@cicf.org.

This article is provided for informational purposes only and should not be construed as legal or financial advice. Each individual’s situation is unique, so before making any decisions around charitable giving, including those discussed herein, you should consult your own legal and financial advisors