Non-cash charitable contributions can be of great benefit at tax time. However, both donors and the recipients frequently overlook required IRS rules which could would to the taxpayer’s detriment. In addition, the taxpayer frequently may often understate the deductible amount of the contribution.
In order to deduct a contribution of $500 or more, the donor must list the property being donated, the date of the donation, as well as the name and tax ID number of the organization. This should be recorded on Form 8283. It has been my experience that many organizations do not make the tax ID number readily available to the donor. It should be placed on the receipt for the donation to make it easier for the donor to properly claim the contribution. When the number is not available, an Internet search may often yield fruitful results by going to the organization website or to www.guidestar.org. Failing that, the donor can call the organization to obtain that information.
The law also specifies that there must be a listing of property donated and its condition. Merely listing “Two bags of clothing” will not suffice. Again, it has been my experience that both parties tend to fall short in this area. Typically, at best, the donor will have a list of the donated items and can attach it to the receipt. The receipt typically states something to the effect of “household goods in good condition.”
To this point, these matters have not been a big issue with the IRS, but the potential is there. Some organizations allow donors to go online to schedule a pick-up for a donation, and provide a receipt at that point. The donor prints it out and fills in the blanks. This lacks credibility, as the organization is, in essence, giving the donor a blank receipt to complete as they see fit.
It is the responsibility of the donor to value the items. I find that donors take two extremes in this area. On the one hand, many donors have an inflated view of the value of their contributions. Others tend to place a minimal value on the amount, frequently short changing themselves and getting a smaller donation. Since the IRS does not require any detailed reporting for cumulative donations of less than $500, many taxpayers will typically claim $495 on their return and avoid completing Form 8283.
Items may be valued in several ways. One of the most effective I have found is the use of a free online program from Turbo Tax called “Its Deductible.” This program will allow the donor to input the name, address, and other information about the recipient organization and the donation. It will then lead the taxpayer through choosing what was donated and provides assistance in placing a proper value on the property. It is also available in a mobile app for Apple.
If the donation is long-term capital gain property, the donor may deduct the fair market value rather than cost basis of the asset. Thus, a donor could buy stock for $1,000, donate it to a charitable organization after more than a year, and deduct the fair market value as a charitable contribution with no gain recognition. If the property is tangible property, such as a painting or other artwork, the recipient organization must use it in its charitable function, or the deduction is limited to basis.
In addition, items having a value of $5,000 or more (with the exception of certain securities) must be accompanied by a qualified appraisal. The cost of the appraisal may also be deducted. The appraiser must sign Form 8283.
Different rules apply to the donation of items such as a vehicle, boat, or airplane. In these situations, the recipient organization must complete a Form 1098-C and provide a contemporaneous copy to the contributor. The IRS states that contemporaneous is within 30 days of the contribution or sale of the item. The amount of the contribution is sale price or the blue book value if the item is not sold.
The form must include information about the donor, the vehicle identification number, mileage, and description of the vehicle.
Don’t stop giving, just do it in a way to satisfy all parties, including the IRS.
In accordance with Circular 230 Disclosure
Dr. John Stancil (My Bald CPA) is Professor Emeritus of Accounting and Tax at Florida Southern College in Lakeland, FL. He is a CPA, CMA, and CFM and passed all exams on the first attempt. He holds a DBA from the University of Memphis and the MBA from the University of Georgia. He has maintained a CPA practice since 1979 with an emphasis in taxation. His areas of expertise include church and clergy tax issues and the foreign earned income credit. He prepares all types of returns, individual and business.
Dr. Stancil has written for the Polk County Business Journal and has presented a number of papers at academic conferences. He wrote the Instructor’s Manual for the 13th edition of Horngren’s Cost Accounting. He is published in the Global Sustainability as a Business Imperative, Green Issues and Debates, The Encyclopedia of Business in Today’s World, The Palmetto Business Review, The CPA Journal, and in the NATP TaxPro Journal. His paper, “Building Sustainability into the Tax Code” was recognized as the outstanding accounting paper at the annual meeting of the South East InfORMS. He wrote a book entitled “Tax Issues Faced by U. S. Missionary Personnel Abroad ” that will soon be published.
He has recently launched a new endeavor, Church Tax Solutions, which presents online, on demand seminars on various church and clergy tax issues.
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