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Charitable giving and substantiation allow businesses to be more generous without harming their bottom line.
When it comes to charitable giving and substantiation, understanding the IRS rules can make a major difference during tax season. Whether you’re donating cash, non-cash items, or contributing to a donor-advised fund, proper documentation is essential to ensure your contributions qualify for tax deductions. Let’s explore what you need to know about substantiating your charitable gifts.
Cash vs. Non-Cash Contributions
Cash donations are the simplest to track and substantiate. These include checks, electronic transfers, credit card payments, and even text message donations. To claim a deduction for a cash gift, you must have a bank record or a written acknowledgment from the charity showing the name of the organization, the date of the contribution, and the amount donated.
For non-cash donations, such as clothing, furniture, vehicles, or securities, substantiation requirements are more detailed. The fair market value (FMV) of the donated item determines the level of documentation needed:
- Under $250: A simple receipt with the charity’s name, date, and a description of the item is enough.
- $250–$500: You’ll need a written acknowledgment from the charity specifying whether you received any goods or services in return.
- $500–$5,000: In addition to the acknowledgment, you must complete Form 8283 and maintain detailed records describing how and when you acquired the property.
- Over $5,000: A qualified appraisal is required, along with Form 8283, Section B.
Failing to properly substantiate your non-cash donations can lead to disallowed deductions — even if the donation itself was legitimate.
Donor-Advised Funds (DAFs)
Donor-advised funds have become a popular tool for charitable giving. They allow donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund to charities over time.
However, substantiation for DAF contributions follows the same basic IRS requirements as other charitable gifts: donors must obtain an acknowledgment from the sponsoring organization (the entity that manages the fund) that states no goods or services were provided in exchange for the contribution. Once funds are deposited into a DAF, they legally belong to the sponsoring organization — meaning you cannot claim an additional deduction when funds are later distributed to other charities.
DAFs are an excellent option for those who wish to “bunch” deductions in a single year for tax efficiency or plan out long-term charitable strategies.
Acknowledgment Requirements and Deadlines
For donations of $250 or more, you must receive a contemporaneous written acknowledgment from the charity before filing your tax return for that year. The acknowledgment should include:
- The name of the charitable organization
- The amount of cash or a description of any non-cash items donated
- A statement confirming whether you received any goods or services in exchange for the contribution (and their estimated value if applicable)
Without this acknowledgment, you cannot claim the deduction — no matter the donation amount. The IRS takes documentation very seriously, and late or incomplete records are among the most common issues during audits involving charitable giving.
Best Practices for Substantiating Charitable Gifts
- Keep digital and paper records. Maintain copies of receipts, bank statements, and acknowledgment letters.
- Verify charitable status. Ensure the organization is a qualified 501(c)(3) entity using the IRS’s Tax Exempt Organization Search tool.
- Be consistent. Make sure the amount claimed on your tax return matches your records and the charity’s acknowledgment.
- Use qualified appraisers. For non-cash donations over $5,000, hire an appraiser who meets IRS requirements and includes all necessary details in the report.
- Track donor-advised fund contributions. Keep separate records for DAF gifts, as these cannot be double-counted or re-deducted.
Give With Confidence
Charitable giving and substantiation go hand in hand. While generosity is its own reward, understanding the IRS documentation rules helps ensure your goodwill is properly recognized come tax time. Whether donating cash, property, or contributing to a donor-advised fund, accurate recordkeeping protects both you and your charitable intentions. By planning ahead and maintaining thorough substantiation, you can give confidently — knowing your contributions will make an impact while also maximizing your potential tax benefits.
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