Many donors are not aware that their contributions may not be deductible, or that deductions may be limited. Here are the general rules:
When an organization claims to be tax-exempt, it does not necessarily mean contributions are deductible. "Tax-exempt" means that the organization does not have to pay federal income taxes, while "tax-deductible" means the donor can deduct contributions to the organization. The Internal Revenue Code defines more than 20 different categories of tax-exempt organizations, but only a few of these are eligible to receive contributions deductible as charitable donations.
Tip: When in doubt, call us or the IRS (800-829-1040) about the deductibility of a contribution.
If you go to a charity affair or buy something to benefit a charity (e.g., a magazine subscription or show tickets), you cannot deduct the full amount you pay. Only the part above the fair market value of the item you purchase is fully deductible.
Example: You pay $50 for a charity luncheon worth $30. Only $20 can be deducted.
Donations made directly to needy individuals are not deductible. Contributions must be made to qualified organizations to be tax-deductible.
Contributions are deductible for the year in which they are actually paid or delivered. Pledges are not deductible they are paid.
No donation of $250 or more is deductible unless the taxpayer has a receipt from the charity substantiating the donation.
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