How to Substantiate Your Charitable Donations

If you make gifts of cash or property to a charity, you can deduct them only if you have the proper substantiation. The rules are different for cash donations and property donations, and can be very confusing. Here is a brief rundown of the rules you need to know.

Cash Donations

All donations must be substantiated. The amount of the donation dictates the type of substantiation that is necessary:

• Cash contributions of less than $250: A bank record, such as a canceled check, or a receipt from the charity showing the name of the donor, the date of the contribution, and the amount of the contribution; a letter or other communication constitutes a receipt.
• Cash contributions of $250 or more: A “contemporaneous written acknowledgment” from the charity; a canceled check is not enough. This rule also applies to out-of-pocket expenses that a volunteer incurs while doing charitable work.

Property Donations

Again, all donations in property must be substantiated in order to be deductible. The fair market value of the property determines which type of substantiation is required:

• For property donations of less than $250: A receipt and a reliable written record. No receipt is necessary if it would be impractical to obtain one (such as leaving used clothing at a charity’s unmanned drop box), but a written record is still necessary.
• For property donations of $250 or more but no more than $500: A written acknowledgment like the one needed for cash donations of $250 or more.
• For property donations of more than $500 but not more than $5,000: In addition to the written acknowledgment, you must complete Section A, Part I, of Form 8283. This means providing information about the manner in which the property was acquired, the date it was acquired, and its cost basis.
• For property donations of more than $5,000, but not more than $500,000: In addition to the requirements for a donation of more than $500, you must obtain a qualified appraisal from a qualified appraiser. The Appraisal Summary in Section B of Form 8283 must be completed, but the appraisal need not be attached to the return. The only exception for this appraisal requirement is for non-publicly traded stock valued between $5,000 and $10,000.
• For property donations more than $500,000: The qualified appraisal must be attached to the return.

Special Rules

Certain types of property donations are subject to special rules. These include donations of:

• Art works, such as sculptures, prints, drawings, paintings, watercolors, ceramics, antiques, decorative arts (such as textiles and carpets), rare manuscripts, historical memorabilia, and other similar objects. For example, if you donate a painting worth $20,000 or more, you may to provide an 8Ù ó 10Ù photo if the IRS requests it.
• Cars, boats, and planes.
• Intellectual property.
• Used clothing and household items (e.g., appliances and electronics).

Final Word

Because these substantiation rules are in the tax law, the IRS cannot simply waive them if a taxpayer has a good reason for not meeting the requirements. Be sure to have your required substantiation in hand when you file your return if you want to claim a charitable contribution deduction. Review your records for this year to see whether you have all necessary written acknowledgments. If not, ask the charities to provide them to you.