Just about everyone knows that charitable contributions are tax deductible. However, only donations made to qualified organizations are deductible. Handing money to a homeless person on the street may be an act of kindness, but it is not something the IRS will allow you to deduct on IRS Form 1040, Schedule A, which is used to claim charitable contributions.
In order to claim a monetary gift, you must keep a record of the contribution, such as a copy of the check, a bank statement, or a thank you note or other written communication from an official 501 (C)3 non-profit organization.
Non-cash contributions – property, clothing, equipment, food – can be deducted at fair market value of the property you donate to qualified organizations. The acknowledgment from the recipient must indicate whether the organization provided any goods or services in exchange for the gift. Written acknowledgments are required for donations worth $250 or more.
Many people write off the tickets to high priced charity events, including golf outings, gala dinners, concerts, etc. You may deduct only the amount that exceeds the fair market value of the benefit received in return.
Lastly, special rules apply to donations of certain types of property such as automobiles and investments that have appreciated in value. For more information, refer to the IRS’s Publication 526, Charitable Contributions. For information on determining the value of your noncash contributions, refer to Publication 561, Determining the Value of Donated Property.