Tax Tip: Deduct Charitable Contributions

Editor's Note: This article is part of our 2013 Tax Tips series. Robert Flach is an expert with almost 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.

NEW YORK (MainStreet) —If you itemize you can deduct on Schedule A cash contributions you make to a qualified church or tax-exempt charity.

But in order to do so the IRS says you must have a hard-copy receipt for every single dollar you contribute – such as:

  • an actual cancelled check
  • a bank record, such as a copy of the front of the check included on your monthly bank statement
  • an entry on a bank or credit card statement showing a credit or debit card charge
  • a written receipt or acknowledgement from the church or charity with its name, the date of the contribution, and the amount of the contribution, or
  • a pay stub or other employer furnished document that shows the amount withheld for a payment to a charity.

You can no longer tell the IRS that you put a ten dollar bill in the collection plate each week. You must write a check to the church for $10 each week. Or you must take advantage of the church's envelope system, which provides you with a written receipt at the end of the year.

You can also claim a tax deduction for the “fair market value” of “non-cash” items, such as used clothes, furniture, and books, donated to a church or charity.

Whether cash or non-cash the contribution must be made to a qualified organization. You cannot deduct contributions made directly to an individual or family, regardless of the individual or family’s financial or health situation.

If you give money directly to a family whose house has burned down or been damaged by flooding it is not deductible. You must give the money to a charity that provides disaster relief, like the Red Cross. Similarly if you give a used coat to a homeless person you cannot deduct the value of the coat, but if you give a used coat to the Salvation Army or other charity that will give the coat to a homeless person that is deductible.

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