June 4, 2015

Substantiation of Charitable Contributions

By Sean Burke, Supervisor, Tax & Business Services

Substantiation of Charitable Contributions

Most taxpayers realize that there is a tax benefit to making cash or non-cash donations to a charity. However, most taxpayers are unaware of the stringent regulations that apply to the substantiation of many non-cash charitable contributions.

There are four categories in which all non-cash charitable deductions fall:

  1. Property valued at less than $250
    • Taxpayers must maintain a receipt from the donee organization, except where impractical to do so (for example, items left at a Goodwill drop box.) However, in such cases the donor must maintain a reliable written record of items. Written records must include the name of the donee, the date and location of the contributions, a description of the property, and the method used to determine the fair market value of the property.
  2. Property valued at $250 – $499
    • Taxpayers must obtain a contemporaneous written acknowledgement from the donee. The acknowledgement must include:
      1. A description (but not value) of any property contributed, other than cash;
      2. Whether the donee provided any goods or services in exchange for the contribution.

        If there were goods and services exchanged, a description and good faith estimate of value must be obtained and included with the tax return filing.(A written acknowledgement must be obtained by the filing date of the return).
  3. Property valued at $500 – $4999
    • Taxpayers must maintain written records that should include:
      1. The approximate date the property was acquired and the manner of acquisition;
      2. A detailed description of the property;
      3. The costs basis of the property;
      4. The fair market value of the property at the time of contribution;
      5. The method used to derive the fair market value.
  4. Property valued in excess of $5,000
    • In addition to the requirements listed above, the taxpayer must also:
      1. Obtain a “qualified appraisal” of the contributed items;
      2. Attach a summary of the appraisal to the tax return.

It is important to note that separately-made donations amounting to less than $250 are not subject to the above requirements, regardless of whether or not the total amount contributed to a specific charity was greater than $250 for the tax year. In addition, “similar items of property” must be aggregated for the purpose of the substantiation rules.

It is pertinent for the taxpayer to maintain adequate records and to adhere to these substantiation requirements in order to support a deductible charitable contribution in the event the deduction is ever challenged.

If you have a question about the substantiation requirements or record-keeping rules related to any non-cash charitable contribution, contact your Marcum tax professional.

Related Industry

Nonprofit & Social Sector