Have You Made a Donation to Disaster Relief Efforts?
In the wake of several natural disasters and national tragedies, there is a huge increase in individuals, groups, and organizations collecting money for the victims of these calamities. While donations are usually made from a philanthropic desire to do some good in this world, sometimes they’re simply made by the desire to reduce one’s tax liability. Either way it’s smart to know the details of where your money is going and how much it’s really going to cost you.
It’s generally a good idea to research the organization you intend to direct your donations to. In past years it’s been easier to spot which groups are considered qualified charitable organizations, but in the era of crowdfunding and misinformation it can be more difficult to determine whether your donation will qualify for a tax deduction.
For example, GoFundMe is a popular platform for raising donations to aid in relief efforts. Scroll through social media after any disaster and you’ll see link after link of individuals who have created a campaign to assist an individual or group that has been affected by tragedy. Some of their pages will incentivize donations by claiming that money contributed toward the campaign is tax deductible. Generally, this is incorrect. According to the GoFundMe website, unless the campaign specifically states that they are a GoFundMe Certified Charity, any donations made will be considered personal gifts and aren’t tax deductible. “Certified” Charities only receive their status if they are a valid, registered 501(c)(3) charitable organization.
Which kinds of organizations qualify?
To be considered a tax-exempt 501(c)(3) charitable organization the organization must be organized and operated exclusively for exempt purposes and none of its earnings should benefit any private shareholder or individual, according to the IRS. Religious and educational organizations, those dedicated to the prevention of cruelty to children and animals, and other forms of non-profit, charitable organizations typically fall under this exemption. If you want to be certain your donation will qualify as a charitable deduction, visit https://www.irs.gov/charities-non-profits/search-for-charities and use the Exempt Organizations Select Check Tool. Enter the name of the organization you intend to send a donation and make sure it has been given 501(c)(3) exemption status.
What if I didn’t send money?
Not all contributions are monetary. When natural disasters occur, generosity often manifests in the form of used clothing, food donations, electronics, vehicles, furniture, etc. The IRS has very specific valuation rules for donations of property for tax filers who itemize their deductions to deduct charitable contributions, but they basically boil down to you being able to deduct the “fair market value” of items that are in good used condition or better for clothing and household items (the most commonly donated items), with special rules for donating vehicles or property of a certain high value.
These donations, of course, must go to a qualified charitable organization, and you need to have documentation for all items donated. The slip of paper from Goodwill is not sufficient documentation. It’s smart to take a picture of any clothing or household item you’re donating to prove the condition of the item, and keep a record of comparable sales prices for items of the same condition that would lend toward supporting fair market value. Review IRS Publication 561 for more details on deducting charitable contributions of property.
Did you donate time?
If you were one of the amazing volunteers who donated their time and personal efforts to aid in disaster relief, there’s good news for you! While you can’t claim a charitable contribution based on market value for your time, you are permitted to deduct any away-from-home travel, fuel, lodging, meals, entertaining expenses, etc. that you paid for to support your volunteer work for a 501(c)(3) charitable organization. One exception to these deductions is for depreciation of a capital asset, such as a vehicle or computer, even when used for charitable purposes. Only actual unreimbursed expenses that can be directly attributed to the services performed for the charitable organization are may be acceptably deducted. For contributions exceeding $250, you will need to substantiate your deduction with a written acknowledgement from the qualifying charitable organization. Maintain detailed records of expenses and submit a statement of expense to the organization to which you volunteered your time.
No matter your reason for making a charitable contribution, it’s usually worth making sure you’re receiving the applicable tax benefits of your donation. Documentation is key, and it’s always smart to check with your CPA about any donations you’ve made that you think will provide you a tax deduction.