14.3 Contributions That Provide You With Benefits
A contribution to a qualifying organization (14.1) is generally deductible only to the extent that you intend to give more than the value of benefits you receive and actually do so.
If you contribute $75 or less and receive benefits, the organization may tell you the value of the benefits. If your contribution exceeds $75, the organization by law must give you a written statement that estimates the value of the benefits provided to you and instructs you to deduct only the portion of your contribution that exceeds the benefits. However, the disclosure statement does not have to be provided to you if you receive only token benefits, or if you receive from a religious organization only “intangible religious benefits.”
Caution
Dues.
Dues paid to a qualified tax-exempt organization are deductible to the extent they exceed the value of benefits from the organization, such as monthly journals, use of a library, or the right to attend luncheons and lectures. As discussed above, you generally must be provided with an estimate of any benefits you received if your donation exceeds $75.
If dues are paid to a social club with the understanding that a specified part goes to a qualifying charity (14.1), you may claim a charitable deduction for dues earmarked for the charity. If the treasurer of your club is actually the agent of the charity, you take the deduction in the year you give him or her the money. If the treasurer is merely your agent, you may take the deduction only in the year the money is remitted to the charity.
Benefit tickets.
Tickets to theater events, tours, concerts, and other entertainments are often sold by charitable organizations at prices higher than the regular admission charge. The difference between the regular admission and the higher amount you pay is deductible as a charitable contribution. If you decline to accept the ticket or return it to the charity for resale, your deduction is the price you paid.
Caution
The charity should explain to you how much is deductible. The charity must provide an explanation if you paid more than $75; see the discussion above.
If the ticket is at or below its normal cost, no deduction is allowed unless you decline the ticket or return it to the charity.
If tickets were purchased for a charity-sponsored series of events and the average cost of a single event is equal to or less than the cost of an individual performance, then a deduction for a returned ticket is based upon the time the ticket was held. Generally, you may deduct only your cost. However, if you have held the ticket for more than a year, you may deduct the price the charity will charge on resale of the ticket.
Donation for the right to buy athletic stadium tickets.
If you contribute to a public or nonprofit college or university and receive the right to buy preferential seating at the school’s athletic complexes, you may deduct 80% of the contribution to the school. The 80% deduction also applies where your contribution gives you the right to buy seating in stadium skyboxes, suites, or special viewing areas. The cost of any tickets you buy is not deductible. The deduction is allowed only to the extent that you receive the right to buy tickets rather than the tickets themselves. For example, if in exchange for a substantial donation you receive a season ticket worth $200, your payment is reduced by $200 before applying the 80% deductible percentage.
No deduction for house donated to fire department.
Some homeowners planning to tear down their homes to make way for constructing new ones have donated the homes to a fire department and claimed a charitable contribution deduction. The fire department uses the home for training exercises in extinguishing fires. The homeowner not only avoids the costs of demolishing the house but also claims a deduction for the value of the home. However, the IRS and Tax Court have held in such cases that the donated homes have minimal value and disallowed the claimed deductions. A federal appeals court sided with the IRS and Tax Court in barring a charitable deduction where a couple donated their house but not the land, with the understanding that the fire department would use it for training exercises and burn it down within a short period of time. The demolition of the home by the fire department was a benefit to the taxpayers and under the “quid-pro-quo” test, no deduction could be claimed because they could not show that the fair market value of the house exceeded the estimated $10,000 in demolition and debris removal costs that would have been incurred had there been no donation. The donated home had only a minimal value because it could not be used by the fire department for residential purposes but only for training exercises.
Token Items and Membership Benefits That Do Not Reduce Your Deduction
Token items.
Popular fund-raising campaigns, such as those for museums, zoos, and public TV, offer token items such as calendars, tote bags, tee shirts, and other items carrying the organization’s logo. You are allowed a full deduction for your contribution if the item is considered to be of insubstantial value under IRS guidelines.
The charity must tell you how much of your contribution is deductible in the solicitation that offers the token item. If the items are insubstantial in value, the charity should tell you that your payment is fully deductible. For example, if in 2012 you contributed at least $49.50, and the offered items cost the charity no more than $9.90, the value of the benefits is ignored and a full 2012 deduction is allowed. A full deduction for 2012 is also allowed if the items were worth no more than 2% of the contribution or $99, whichever is less. The $49.50, $9.90, and $99 amounts change annually for inflation.
Newsletters or program guides that are not of commercial quality are treated as token items having no fair market value or cost if their primary purpose is to inform members about the organization’s activities, and they are not available to nonmembers by paid subscription or through newsstand sales.
Publications with articles written for compensation and advertising are treated as commercial-quality publications for which the organization must figure value to determine if a full deduction is allowed under the “insubstantial value” test. Professional journals, whether or not they have such articles and advertising, will generally be treated as commercial-quality publications that must be valued.
Filing Tip
Membership benefits.
If you contribute $75 or less for an annual membership in a qualified charity (14.1) and you receive only the following benefits, the benefits can be disregarded and you may deduct your entire payment: