Which Charitable Contributions are Not Taxable?

Nashua, NH Resident Looks for Advice

Any charitable donation that offers you something in return as the donating person is not tax-deductible.  This includes money spent on charitable fundraisers where there is a prize, such as a raffle or drawing, is not tax-deductible.  Similarly, a donation that is to purchase a product for your own use, such as cookies, wrapping paper, or another item is not considered a charitable deduction.  When itemizing charitable deductions on your taxes, keep in mind that these donations cannot be from which you have receive an item yourself, including a chance to win something.

A Nashua resident had purchased holiday paper from a local charity.  Unsure about the rules surrounding charitable tax deductions, he contacted Merrimack Tax Associates for advice.

Gifts that Benefit You Cannot Be Claimed as Charitable Deductions

A favorite among fundraisers is to offer an incentive to those donating.  This can be a raffle, giveaway, or other enticement to increase donations.  Unfortunately, in doing so this makes your charitable deduction no longer tax-deductible.  Any time you receive a benefit from a donation, including just a chance to win, you can no longer deduct this donation.  If you are receiving an item such as popcorn or wrapping paper, you can take the amount that you paid to the charity less the fair market value of the item.  The difference in these two numbers is what can be deducted on your taxes as a charitable expense.

Organizations Must Be a 501(c)(3) to Claim as a Charitable Donation

In a world filled with GoFundMe campaigns and pop-up fundraising, it is important to note that to be considered a charitable tax deduction the organization must have a 501(c)(3) status.  Other donations to local charities, families that have suffered a loss, or to help an individual cannot be claimed on your taxes.

For any charitable donation that exceeds $250, you need to have written documentation from the receiving organization to serve as a receipt for your donation.  This paperwork is important in the event of an IRS audit, which could leave you scrambling to try to put this together.

The Nashua resident now has a better understanding of what qualifies as charitable tax deductions, and what will not.  With this information she can better know what to expect when it comes time to file her taxes.