How to Claim Non Profit Write Offs on Your Taxes

The phrase “non-profit write-offs” describes the tax deduction for charitable contributions. When you donate to a qualified organization, the Internal Revenue Service (IRS) allows you to subtract that contribution from your income, which can lower your overall tax liability. Understanding the specific rules is necessary for claiming them correctly. This article details the requirements for deducting these donations, including which organizations qualify, what types of contributions are accepted, how to value them, the necessary documentation, and how to claim the deduction on your tax return.

Identifying Deductible Contributions

A donation is only deductible if made to a “qualified organization” as defined by the IRS. This includes entities with 501(c)(3) status, which are operated for religious, charitable, scientific, literary, or educational purposes. Examples include churches, non-profit hospitals and schools, and other public charities.

You can verify a charity’s eligibility using the IRS’s online Tax Exempt Organization Search tool to confirm it is eligible to receive tax-deductible contributions. Not all non-profits are qualified organizations for deduction purposes. Contributions to political campaigns, for-profit businesses, individuals, and certain other 501(c) groups like social clubs or homeowners’ associations are not deductible.

The type of contribution also determines its deductibility. The most common forms are cash and non-cash property. Cash contributions can be made by check, credit card, or payroll deduction, while non-cash property includes items like clothing, furniture, vehicles, and stocks.

Certain contributions, however, are explicitly not deductible. You cannot deduct the value of your time or services, even if you are providing professional expertise to a charity. Likewise, donations of blood, tuition payments to a non-profit school, or dues paid to fraternal orders are not considered deductible charitable contributions.

Calculating the Value of Your Donation

The method for calculating your donation’s value depends on whether you gave cash or property. For cash donations, the value is the amount of money you contributed.

For non-cash property, the value is its Fair Market Value (FMV) at the time of the donation, which is the price it would sell for on the open market. For used household goods and clothing, this is determined by what similar items sell for at a thrift shop.

Special rules apply to “capital gain property,” which is property that would have resulted in a long-term capital gain if sold. This includes assets like stocks or real estate held for more than one year, for which you can deduct the full FMV. If the property was held for a year or less, your deduction is limited to your cost basis.

Your total charitable deduction for a year is subject to limits based on your Adjusted Gross Income (AGI). For cash contributions to most public charities, you can deduct up to 60% of your AGI. For donations of non-cash capital gain property, the limit is 30% of your AGI. If your donations exceed these limits, you can carry over the excess for up to five years.

If you receive a benefit in exchange for your contribution, you must reduce your deduction by the value of that benefit. For example, if you pay $200 for a charity dinner ticket and the dinner’s value is $50, you can only deduct $150. The charity must provide you with an estimate of the value of goods or services you received.

Required Documentation for Your Write-Off

Proper record-keeping is required for claiming a charitable deduction, and the specific documentation depends on the donation’s value and type. For any single contribution under $250, you must keep a reliable record, such as a canceled check, bank statement, or a receipt from the charity showing its name, the date, and the amount.

When a single contribution is $250 or more, you must obtain a “contemporaneous written acknowledgment” from the charity. This document must include the charity’s name, the contribution date, and the cash amount. For non-cash property, it must describe the item and state whether the organization provided any goods or services in exchange for the gift.

If your total deduction for all non-cash contributions exceeds $500 for the year, you must complete and file IRS Form 8283, Noncash Charitable Contributions, with your tax return. For donations valued over $500 but not more than $5,000, you are required to complete Section A of Form 8283. This section asks for information such as the charity’s name and address, a description of the property, the date you acquired it, how you acquired it, your original cost (or basis), its fair market value, and the method you used to determine that value.

Donations exceeding $5,000 require a formal written appraisal from a qualified appraiser. You must also complete Section B of Form 8283, which the appraiser and an official from the charity must sign.

Claiming the Deduction on Your Tax Return

After identifying qualifying donations, calculating their value, and gathering all necessary documentation, the final step is to report the deduction on your federal income tax return. To do so, you must choose to itemize your deductions rather than taking the standard deduction. You can only benefit from the charitable deduction if your total itemized deductions exceed your available standard deduction amount.

The deduction is claimed on Schedule A (Form 1040), Itemized Deductions. You will report your total cash and non-cash contributions on the designated lines of this schedule. Submitting your tax return with the completed Schedule A finalizes the process of claiming your non-profit write-offs.