14.1 Deductible Contributions
Charitable contributions are deductible only as itemized deductions on Schedule A of Form 1040. You may deduct donations to religious, charitable, educational, and other philanthropic organizations approved by the IRS to receive deductible contributions; see the listing later in this section. If you are unsure of the tax status of a philanthropy, ask the organization about its status, or check the IRS list of tax-exempt organizations (IRS Publication 78). Donations to the federal, state, and local government are also deductible.
Substantiating your 2012 donations.
Keep a cancelled check or receipt from the charity as proof of your donations. For donations of $250 or more, you need to obtain a written acknowledgment that notes any benefits or goods that you received in exchange (14.14).
For a donated car, other motor vehicle, boat, or airplane valued at over $500, you must obtain an acknowledgment on Form 1098-C (or equivalent substitute) that you must attach to your return (14.7).
Year-end donations.
You deduct donations on the tax return filed for the year in which you paid them in cash or property. A contribution by check is deductible in the year you give the check, even if it is cashed in the following year. A check mailed and dated on the last day of 2012 is deductible for 2012. A check postdated until 2013 is not deductible until 2013. A pledge or a note is not deductible until paid. Donations made through a credit card are deductible in the year the charge is made. Donations made through a pay-by-phone bank account are not deductible until the payment date shown on the bank statement.
Law Alert
Delivering securities.
If you are planning to donate appreciated securities near the end of the year, make sure that you consider these delivery rules in timing the donation. If you unconditionally deliver or mail a properly endorsed stock certificate to the donee or its agent, the gift is considered completed on the date of delivery or mailing, provided it is received in the ordinary course of the mails. If you deliver the certificate to your bank or broker as your agent, or to the issuing corporation or its agent, your gift is not complete until the stock is transferred to the donee’s name on the corporation’s books. This transfer may take several weeks, so, if possible, make the delivery at least three weeks before the end of the year to assure a current deduction. If you plan to donate mutual fund shares to a charity towards the end of the year, contact the fund company to ensure that the transfer of shares to the name of the charity can be completed by the end of the year.
Debts.
You may assign to a charity a debt payable to you. A deductible contribution may be claimed in the year your debtor pays the charity.
Limits on deduction.
Depending on the nature of the organization and the donated property, a deduction ceiling of 50%, 30%, or 20% of adjusted gross income applies. In general, the deduction ceiling is 50% for cash contributions and 30% for contributions of appreciated property held long term (14.17). Where donations in one year exceed the percentage limits, a five-year carryover of the excess may be allowed (14.18).
Organizations Qualifying for Deductible Donations
The following types of organizations may qualify to receive deductible contributions:
A domestic nonprofit organization, trust, community chest, fund, or foundation that is operated exclusively for one of the following purposes:
Domestic nonprofit veterans’ organizations or auxiliary units.
A domestic fraternal group operating under the lodge system.
The contributions must be used exclusively for religious, charitable, scientific, literary, or educational purposes; or for the prevention of cruelty to children or animals.
Nonprofit cemetery and burial companies, where the voluntary contribution benefits the whole cemetery, not only your plot.
Legal services corporations established under the Legal Services Corporation Act.
Such corporations provide legal assistance to financially needy people in noncriminal proceedings.
The United States, a U.S. possession, Puerto Rico, a state, city, or town or Indian tribal government.
The gift must be for public purposes. The gift may be directed to a government unit, or it may be to a government agency such as a state university, a fire department, a civil defense group, or a committee to raise funds to develop land into a public park. Donations may be made to the Social Security system (Federal Old Age and Survivors Insurance Trust Fund). Donations may be made to the federal government to help reduce the national debt; checks should be made payable to “Bureau of the Public Debt.”