Why You Must Document Your Charitable Contributions

December 15, 2017
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It is very important that you keep good records to document your charitable contributions.

A deduction will not be allowed for any contribution made by cash or check unless you have a hard-copy record of the contribution. The record must be in the form of:

  • an actual canceled check
  • a bank record (for instance, a copy of the front of the check included on your monthly bank statement)
  • an entry on a bank or credit card statement indicating a credit or debit card charge
  • a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution.

You can no longer tell the IRS that you put a five- or 10-dollar bill in the collection plate each week. You must write a check to the church for the $5 or $10 each week or take advantage of the church’s “envelope” system, which will provide you with a written receipt at the end of the year.

The law does not say that all contributions of more than $50 or more than $100 must be documented. It says all cash contributions must be documented. If you give the Disabled American Veterans a dollar for a poppy, you must get a receipt!

If you give $250 or more in one gift, you must get a written receipt or acknowledgement from the charity at the time the donation is made. This receipt or acknowledgment must include the name and address of the organization the date and amount of the contribution, and—very, very important—must include the statement that “No goods or services were provided by the organization in return for the contribution.” Tax court has denied a charitable deduction on several occasions when the receipt from the organization did not include this statement.

If you donate clothes, food, household items, furniture, and the like, you can claim a deduction for the “fair market value” of the items donated. You are responsible for determining the fair market value. The charity to which you make the donation is not required to, and in most cases will not, provide you with a value.

Make and keep a detailed list of the individual items (for example, “three dress shirts”) you are giving that includes the condition of the items (such as good, excellent, or new—you cannot deduct the contribution of a used item of clothing or household item unless it is in at least “good” condition). If you put a bag full of clothes in the Goodwill bin you must make a list of what is in the bag. And be sure to note the name and address of the organization. As with cash contributions, you must have a written receipt if the value is more than $250.

You can deduct any out-of-pocket expenses incurred in the course of providing volunteer services to a qualified church or charity, including 14 cents per mile if you use your car. And if, for example, you bake a cake or cookies for a church holiday bake sale, you can deduct the cost of the ingredients—but as with any other contribution, you must keep a record of these expenses. It couldn’t hurt to get a letter from the charity that identifies your volunteer activity, or donation, with the statement about goods or services included.

Special rules apply for claiming a deduction for donating a motor vehicle to charity. Your deduction depends on what the charity does with the vehicle, and the charity must provide you with IRS Form 1098-C.

At HFG Wealth Management, we embrace a method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

 

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