Charitable contributions are one of the most generous and gratifying ways of supporting individuals in need – and as a bonus, they are a superior avenue for minimizing tax burdens. By contributing to those in need, you can make a positive impact on their lives and also optimize your tax savings through itemized deductions. It’s important to note that your contribution doesn’t have to be in the form of cash in order for it to qualify for a charitable deduction. Numerous reputable charities embrace various kinds of assets or property (e.g., clothing, household appliances, furniture, artworks, and etc.) to support their charitable mission. The non-cash charitable contributions, however, must satisfy rigorous substantiation criteria to qualify for the deduction.
Documentation Required to Substantiate Non-Cash Contributions
The documentation needed to support your non-cash contribution varies based on the property you donate and its claimed value. To substantiate your contribution, you may be required to provide the following three documents:
- Form 8283 – Noncash Charitable Contributions
- Qualified Appraisal – An appraisal document crafted, dated, and authenticated by a qualified appraiser, who is an individual with proven knowledge and expertise in assessing the particular type of property being appraised.
- Contemporaneous Written Acknowledgement (CWA)
Whether the documentation mentioned above is required for the non-cash contribution made depends on the value of the property donated:
- Contributions under $250 – For contributions under $250, a receipt must be obtained and retained that includes essential details such as the charity’s name, address, the date of the contribution, and a description of the donated property or asset.
- Contributions between $250 and $5,000 – If the contributions are between $250 and $5,000, a Contemporaneous Written Acknowledgement (CWA) must be obtained from the charitable organization to which you’ve given property either before you file your tax return or by the due date, with the inclusion of any extensions. This acknowledgment should contain details about the donated property and specify whether you received any goods or services from the charity as a result of your donation. If you did receive goods or services, the acknowledgment should also include a reasonable, good faith estimate of their value. Additionally, you are required to submit a Form 8283 for donations that fall within this particular threshold, with the Section A of the form completed for substantiation purposes.
- Contributions exceeding $5,000 – For contributions that are greater than $5,000, a CWA and a qualified appraisal must be acquired. Furthermore, you are required to complete Form 8283.
Prior to donating noncash items to charitable organizations, it’s essential to consider the documentation requirements for these contributions. Securing a Contemporaneous Written Acknowledgement (CWA) and a qualified appraisal will not only aid you in claiming an itemized charitable deduction on your tax return, but also provide the necessary proof for the value of the property donated. By consulting these guidelines, you can navigate through the process of donating noncash items with confidence and assurance, knowing that you have fulfilled the essential requirements and are taking advantage of your tax saving opportunities.
IRS Publication 561 – Determining the Value of Donated Property:
Charitable Organizations – Substantiating Noncash Contributions:
Things to Consider Before Making Non-Cash Charitable Contributions:
Publication 526 (2022), Charitable Contributions:
Please contact the Not-for-Profit Niche team at Gilliam Bell Moser LLP for further guidance.