Tax Requirements of Charitable Giving

In addition to weighing out the Advantages and Disadvantages of Bequests and Outright Gifts, it is important to examine some of the legal and tax requirements imposed by the IRS and State taxing authorities:

  • Organization Must Qualify to Receive Charitable Contributions – IRS Publication 526 provides guidance as to what kinds of organizations are eligible to receive charitable contributions.  While this may seem obvious, it is the Donor who will ultimately bear the burden if a recipient organization turns out not to qualify.
  • Proper Documentation Must be Filed with the Internal Revenue Service – Donors may only deduct a charitable contribution that exceeds $250.00 if he or she receives an Acknowledgment from the qualified organization or certain payroll deduction records. If more than one gift exceeding $250.00 is made, a Donor must receive either separate acknowledgments for each gift that exceeds $250.00 or one acknowledgment that shows their total contributions.
  • Fair Market Value of the Donated Property must be Assessed – For cash or publicly traded securities, this requirement is fairly easy to carry out. Less clear, however, can be the fair market value of assets that are more difficult to evaluate (i.e. works of art, real estate, etc).

More sophisticated giving techniques also involve tax and legal requirements.

Due to the serious nature of these requirements, we always recommend seeking qualified legal counsel to assist you when making donations over $250.00.

For additional information and requirements, consult these IRS Publications:

IRS Publication 561: Determining the Value of Donated Property

IRS Publication 526: Charitable Contributions