Itemized Deductions from A to Z, Part 6: Feeling Charitable and Making Contributions

This is part six in our series on Itemized Deductions. To read the rest of the series, click here. For additional information regarding 2014 tax planning, you can download our 2014 Tax Planning Guide from the Resources tab on our website.

First, let’s look at what type of organization qualifies to receive deductible contributions. The organization has to be a domestic nonprofit that is operated for religious, scientific, charitable or other qualifying purposes. A trust, community foundation or other organizations could qualify as well. If you don’t know and want to make sure your contribution qualifies, research the organization or ask before you donate.

It’s also very important to know about a few gifts that will not qualify for a deduction–cash or non-cash:

  • Political contributions to campaigns or PACS
  • Donations to a specific needy individual(s)
  • Contributions to foreign charitable organizations. However, a U.S.-based charity doing work overseas qualifies.
  • Donations of services – e.g. a donation of time (Unreimbursed expenses do qualify.)
  • Fraternal or profession organizations except where the contribution funds charitable or educational activities
  • Social clubs like fraternities or sororities

Also limited are charitable contributions that provide benefits to you—like purchasing tickets to a charitable event providing food, drinks and entertainment. Your deduction is the cost of the tickets less the benefit provided. In most instances, the charity will provide a statement estimating the benefit. If the amount is over $75, the charity is required to provide a written statement.
If you donate the entire ticket back to the organization, your deduction is the entire ticket price.

Planning tip:
In this part of the country, one common donation with a benefit is the right to purchase football tickets. You donate a certain sum to your favorite university, and that entitles you, the donor, to purchase tickets. The deduction is limited to 80% of the contribution.

Over the next few posts, we’ll cover some basics about cash and non-cash charitable contributions.