Q. If you itemize deductions on your tax return, which one of the following can you claim a charitable deduction for?
a. The value of blood donated to a blood bank
b. Money given to the Boy Scouts or Girl Scouts
c. The value of your time or services volunteering at a charity
d. Money you must pay to a homeowners’ association
The answer is b
Generally, you can only deduct contributions of money or property you make to a qualified organization if you itemize deductions on your tax return. The Boy Scouts of America and the Girl Scouts of America are two examples of qualified organizations.
Other examples of qualified nonprofit organizations are the United Way, the American Red Cross, CARE and Goodwill Industries. In addition, gifts to qualified groups include most not-for-profit colleges, war veterans’ groups, museums, religious organizations, volunteer fire companies and animal rescue groups. To find out if an organization is qualified, go to: https://www.irs.gov/charities-non-profits/tax-exempt-organization-search
Why the Other Answers Are Incorrect
Unfortunately, the federal tax code doesn’t allow a charitable deduction for the value of blood given to a blood bank (multiple choice a. in the Tax Quiz).
Also not allowed is a deduction for the value of your time or services volunteering at a not-for-profit organization (multiple choice c. in the Tax Quiz). But there’s one related tax break you may be able to claim. Despite not being able to claim a deduction for your time volunteering for a charitable organization, you can deduct any out-of-pocket expenses you incur while providing charitable services and 14 cents for each mile driven doing charitable work.
A deduction also isn’t allowed for money required to be paid to a homeowners’ association (multiple choice d. in the Tax Quiz) because you receive something in exchange. In order to be deductible, a gift must be voluntary and made without getting, or expecting to get, anything of equal value in return.
Itemizing Is Once Again Required for 2022
Generally, taxpayers who don’t itemize their deductions (and instead claim the standard deduction) can’t claim a charitable deduction. However, under COVID-19 relief laws, individuals who don’t itemize deductions can claim a federal income tax write-off for up to $300 of cash contributions to IRS-approved charities for the 2021 tax year. This deduction is $600 for married joint filers for cash contributions made in 2021. Unfortunately, the deduction for nonitemizers isn’t available for 2022 — unless Congress acts to extend it.
The amount of charitable deductions may be limited, depending on your tax situation. Your deduction for charitable contributions generally can’t be more than 60% of your adjusted gross income (AGI), but in some cases 20%, 30%, or 50% limits may apply. In addition, a deduction generally must be reduced by the value of any benefit received from the charity.
Get Proof Gifts Were Made
Keep in mind that the IRS imposes recordkeeping and substantiation rules on donors of charitable contributions. For example, you must have a bank, credit card or written record from a charity for any monetary contribution you claim as a charitable deduction on your income tax return. And you’re responsible for obtaining a written acknowledgment from a charity for any single contribution of $250 or more before you can claim a charitable contribution deduction.
Additional requirements apply to some types of donations. Your tax advisor can answer any questions you have about charitable donations and help ensure you claim all tax deductions to which you are entitled.
Please contact Julia Lafferty via our online contact form for more information.
Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.