Make Sure You Have Proof to Support Your Charitable Tax Deductions
In an audit, the IRS may deny your charitable write-offs if you don't have a record of your contributions.
Question: What records do I need to keep or receive from a charity to deduct my contributions when I file my 2017 taxes?
Answer: The records you need depend on the type and the size of the gift. It's important to keep the right records in your files, so you don't lose the deduction if you're audited.
"The IRS is unforgiving on charitable contributions. If you don't have the right pieces of paper, you don't get the deductions," says Bill Fleming, a managing director with accounting firm PwC.
Cash gifts of less than $250. Keep a canceled check, credit-card receipt, bank record or acknowledgement from the charity showing the date and amount of the contribution. Keep your pay stub showing any contributions you made through payroll deduction.
Gifts of $250 or more. You'll need a written acknowledgment from the charity including the amount and date of your contribution. "And the receipt has to have the magic words on it -- 'no goods or services were received,' " says Fleming. If his clients made donations of more than $250 and have a thank-you note from the charity that doesn't include those words, Fleming has them go back to the charity to get the extra documentation. The receipt has to be dated before the tax-filing deadline. The receipt from the charity is essential for gifts of more than $250, but Fleming also recommends keeping your canceled check, credit card receipt or bank statement showing the amount. "It's a good idea to keep the check anyway because it will give you context about when you gave the donation, especially if you have to go back to the charity to get the receipt," he says.
Noncash donations. A charity will provide a form acknowledging a gift of, say, clothes or furniture, but it's up to you to determine the value. You can deduct the fair market value of the items, which is what you would get for the items based on their age and condition if you sold them. Some charities -- such as the Salvation Army and Goodwill -- have value guides that can help. (Your local Goodwill may also have a more-detailed value guide.) Some tax software programs have value guides, too, such as TurboTax's ItsDeductible. Fleming recommends taking a picture of the items you give away and making an itemized list of all of them and the value when you make the donation.
Gifts of items worth more than $5,000. You generally need an appraisal valuing items worth more than $5,000, in addition to an acknowledgement from the charity. For more information, see IRS Publication 561, Determining the Value of Donated Property.
Charitable mileage and travel. You can generally deduct expenses for your travel while performing services for a charity, including 14 cents per mile driven as well as parking fees and tolls. Keep a mileage log with the date and reason for the trip, just as you would do with business travel. You may be able to deduct the cost of a hotel if you must stay overnight to perform your charitable duties (as long as it isn't primarily a vacation -- or, as the IRS says, "if there is no significant element of personal pleasure, recreation or vacation in the travel"). "A lot of our clients are trustees for colleges and organizations, and we can take the cost of the hotel room if they're away overnight for a meeting," says Fleming. He recommends getting a letter from the charity explaining your responsibility and the meeting you are attending. You'll also need an acknowledgement from the charity for travel expenses of $250 or more.
Out-of-pocket charitable expenses. You can deduct the cost of items you buy for a charity yourself, such as ingredients purchased to make a casserole for a soup kitchen. Keep receipts of those expenses and the date and reason for the purchase. "The more records you have, the better off you are," says Fleming.
Qualified charitable distributions from an IRA. If you're older than 70½, you can give up to $100,000 each year tax-free from your traditional IRA to charity. It counts as your required minimum distribution but isn't included in your adjusted gross income. You'll receive a Form 1099-R from your IRA administrator reporting your IRA distributions for the year. But it won't specify how much was a tax-free transfer to charity, so it's important to keep a letter from the charity acknowledging the donation. "The 1099 given to your tax preparer gives no clue that it went to charity," Fleming says. Give the charity a heads-up before making the tax-free transfer from your IRA, so it will have your name and address for the acknowledgement. Otherwise, it may not have that information when the money comes directly from your IRA administrator. You report the tax-free portion of the IRA distribution when you file your 1040 tax form. For more information about reporting QCDs, see How to Report a Tax-Free Transfer From an IRA to Charity.
Gifts made through a donor-advised fund. Recordkeeping is easy if you have a donor-advised fund. "We love donor-advised funds because they're in the business to do this, and they know all the rules and give you good receipts," says Fleming.
You will get a single acknowledgement from the donor-advised fund for any tax-deductible contribution you make to a fund for the year -- no matter how many grants your fund awards to charities. Donor-advised funds also have experience valuing and providing records for donations of appreciated stock, nonpublic stock, property and other investments that may be complicated to value for the charitable deduction.
For more information about the tax rules for charitable gifts, see IRS Publication 526, Charitable Contributions. For more information about tax records to keep and toss, see When to Toss Tax Records.