How can I find out if contributions to a particular charity are tax-deductible?

To obtain tax-exempt status under Section 501(c)(3) of the Internal Revenue Code, an organization has to file certain documents with the IRS that prove it is organized and operated for specified charitable purposes.

Organizations with 501(c)(3) status are those that the IRS considers charitable, educational, religious, scientific or literary, those that prevent cruelty to animals, and those that foster national or international sports competition.

When the IRS rules positively on an application, the organization is eligible to receive contributions deductible as charitable donations for federal income tax purposes. The charity receives a "Determination Letter" formally notifying it of its charitable status. Older charities may have a "101(6) ruling," which corresponds to Section 501(c)(3) of the current IRC. Churches and small charities with less than $5,000 of annual gross receipts (subject to the Gross Receipts test) do not have to apply to the IRS for exemption.

You can search the IRS database for a list of tax-exempt organizations eligible to receive deductible contributions.

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What information can I obtain from the IRS about a charity?

You can obtain three documents on a specific charity by sending a written request to the attention of the Disclosure Officer at your nearest IRS District Office. The IRS will charge a per-page copying fee for these items. To speed your request, have the full, official name of the charity, as well as the city and state location.

These three publicly available documents are:

  • Form 1023 - the application filed by the charity to obtain tax-exempt status.
  • IRS Letter of Determination - the two-page IRS letter that notifies the organization of its tax-exempt status.
  • Form 990 - the financial/income tax form filed with the IRS annually by the charity. Charities with a gross income of less than $25,000 and churches are not required to file this form. Among other things, Form 990 includes information on the charity's income, expenses, assets, liabilities and net assets in the past fiscal year. Form 990 also identifies the salaries of the charity's five highest-paid employees. When contacting the IRS for copies, specify the fiscal year.

If your request for information involves only Form 990, you can get a faster response by writing directly to the IRS Service Center where the charity files its return.

The charity registration office in your state (usually a division of the state attorney general's office) may also have a copy of the charity's latest Form 990, along with other publicly available information on charities soliciting in your state.

A charity's application for tax-exempt status and its annual Form 990 must be made available for public inspection during regular business hours at the principal office of the charity and at each of its regional or district offices containing three or more employees. The charity is not required to provide photocopies of the return but must have a copy on hand for public inspection.

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What types of deductible contributions can be made to charity?

Generally, you can donate money or property to charity. A deduction is usually available for the fair market value of the money or property. However, for certain property the deduction is limited to your cost basis; inventory (some exceptions), certain creative works, stocks held short term and certain business-use property. You can also donate your services to charity, however, you may not deduct the value of your services. You can deduct your travel expenses and some out-of-pocket expenses.

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What types of organizations generally qualify for a charitable deduction?

  • Churches, synagogues, temples, mosques, and other religious organizations.
  • Federal, state and local governments if the proceeds are used for public purposes.
  • Nonprofit schools, hospitals and volunteer fire companies.
  • Public parks and recreation facilities.
  • Salvation Army, United Way, Red Cross, Goodwill, Boy Scouts and Girl Scouts.
  • War veterans' groups.

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What types of organizations generally do not qualify for a charitable deduction?

  • Social and sports clubs.
  • For-profit organizations.
  • Lottery, bingo or raffle tickets.
  • Dues to social or recreational clubs.
  • Homeowners' associations.
  • Individuals.
  • Political organizations.

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What is the limit on the deductibility of charitable contributions?

The amount of your deduction for charitable contributions is limited to 50 percent of your adjusted gross income and may be limited to 20 or 30 percent of your adjusted gross income, depending on the type of property you give and the type of organization you give it to. Verify with your tax advisor which limit applies.

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Can I deduct contributions to tax-exempt organizations?

Not necessarily. Tax-exempt means that the organization does not have to pay federal income taxes while tax-deductible means the donor can deduct contributions to the organization. Only certain categories allow deduction.

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What should I look out for in my charitable giving?

  • If you go to a charity affair or buy something to benefit a charity, only the part above the fair market value is deductible. For example, if you pay $500 for a charity luncheon worth $200, only $300 can be deducted.
  • Contributions are deductible only for the year in which they are actually paid or delivered; pledges are not deductible until paid.
  • No donation is deductible without a receipt from the charity substantiating the donation.
  • Donations to individuals are not deductible.

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Is federal gift or estate tax due on my charitable gift?

Charitable gifts made pursuant to your will reduce your estate that is subject to estate tax. Lifetime gifts have the same estate tax effect, along with a current income tax deduction.

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Some charities talk about planned or deferred giving. What is that?

These are ways whereby both you (or your family) and charity enjoy your property or its income. Popular methods include:

Life Insurance: Name a charity as a beneficiary. Some limitations apply; premiums may be tax-deductible.

Charitable Remainder Trust: Assets go to a trust paying non-charitable beneficiaries for life/fixed term; remainder goes to charity. Immediate income tax deduction for remainder interest.

Charitable Lead Trust: Assets go to a trust paying charity first; remainder goes to heirs. Deduction for annual payments to charity.

Charitable Gift Annuity: Contract with charity to pay a fixed amount annually for life. Deduction = gift minus present value of annuity.

Pooled Income Fund: Funds pooled in charity-controlled fund. Beneficiary receives income; remainder goes to charity. Immediate deduction based on remainder interest.

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This Content is for informational purposes only. Nothing contained herein constitutes accounting, tax, financial, investment, legal or other professional advice. Seek advice of a licensed professional before making any accounting, tax, financial, investment or legal decision.