Charitable Contribution Substantiation Rules

Cash Contributions - Cash contributions, regardless of the amount, must be substantiated with a bank record or written communication from the donee showing the name of the charitable organization, date and amount of the contribution.

The recordkeeping requirements may not be satisfied by maintaining other written records. This means that unless the charitable organization provides written communication, cash donations put into a “Christmas kettle,” church collection plate, pass-the-hat collections at youth sporting events, etc., will not be deductible. Donations made by a debit or credit card can be substantiated by a bank record.

These rules make it easy for the IRS to audit a taxpayer's charitable contributions by correspondence. They need only request that you provide copies of the required substantiation by mail. If you are unable to provide it, they can make the appropriate tax, interest and penalty adjustments and send you a bill. Generally, the charitable contribution audit is an automatic companion audit item for other audit issues.

Non-Cash Contributions - No deduction is allowed for a charitable contribution of clothing or household items unless the clothing or household item is in good used condition or better. Household items include furniture, furnishings, electronics, appliances, linens, and other similar items. Food, paintings, antiques, and other objects of art, jewelry and gems, and collections are excluded from the provision.

Generally, the verification rules for contributions of clothing and household items require that you obtain a receipt from the charity including its name, date and location of the contribution, and a reasonably detailed description of the property. In addition, you must also keep a record of each item contributed, indicating the name and address of the charity, date and location of the contribution, and a description of the property in detail that is reasonable under the circumstances. If the contribution is valued at $250 or more, the acknowledgement from the charity must indicate whether you received any goods or services in return for your contribution and the value of those services. Contributions of property valued at $500 or more must be substantiated by your records that also indicate how the property was acquired, the approximate acquisition date, and your cost or basis in the property. For contributions totaling $5,000 or more, a qualified appraisal is generally required.

If you have questions regarding how these rules may affect your specific situation, please call.