July 21, 2005 -- Donations to religious, charitable, educational, and other qualified organizations can be deducted on your federal income tax return. However, in order to preserve this tax benefit, the donation must meet certain substantiation requirements. The following is a summary of the supporting documentation rules for various types of charitable contributions.

Contributions Less than $250

This category requires a receipt showing the name of the organization, the date and the amount. As an alternative, a cancelled check would be sufficient. For contributions of property, an acknowledgement from the organization showing the name, date, place of contribution and a description of the property is needed.  If it is not practical to obtain a receipt or acknowledgement, reliable written records must be maintained.

Contribution of $250 or More

You must get a written acknowledgement from the organization since a cancelled check is not sufficient. 

The acknowledgement should state the name of the organization, the date, the amount and whether the organization provided any goods or services in return for your contributions.  If property is donated, the written acknowledgement must also describe the property but the organization does not have to value the property.

If the property contribution is $5,000 or more the deduction must be supported by a written appraisal and the appraiser must sign the taxpayer’s Form 8283. An appraisal is not required for donations of publicly traded securities.

Vehicle Donations

Beginning in 2005, in order for a taxpayer to deduct a charitable contribution of a vehicle for which the fair market value exceeds $500, the following rules apply. If the charity makes material improvements to the vehicle prior to selling it, or it regularly uses it to help carry out the charity’s exempt purpose for an extended period of time, the fair market value on the date of the donation can be used. If the organization does not make material improvements or use it in its exempt activities, but instead sells the vehicle, the donor’s deduction is limited to the gross proceeds received by the charity from the sale.

Also, effective for 2005, if the vehicle donation exceeds $500, the taxpayer must include a contemporaneous written acknowledgement from the donee organization with their return.

For more information, contact an Asher tax professional at 215-564-1900.

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