Giving to non-charity organizations: An FAQ
Answers to tax questions about religious, political, and crowdfunding giving.
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When it comes to giving, most people immediately think of charitable donations to organizations like the Red Cross or Salvation Army. However, there exists a wide range of non-charity organizations to which people contribute, such as political campaigns, advocacy groups, and personal fundraising initiatives.
While charitable donations to eligible organizations typically offer tax benefits, donations to non-charity organizations may not always qualify for tax deductions.
For accountants, it’s important to understand the specific guidelines set forth by the IRS for individuals and organizations who make donations to non-charity organizations. Let’s take a look at some commonly asked questions.
Are political donations tax deductible?
No. Political donations are not generally tax-deductible. This includes contributions made to support political candidates or parties, as well as donations to political action committees (PACs) that engage in campaign-related activities. The IRS prohibits the tax deduction of donations intended to influence elections or support political activities.
Are campaign contributions tax deductible?
No. Contributions made to support specific political campaigns are not tax-deductible. Political campaign contributions are considered as non-deductible personal expenses, regardless of whether they are made to local, state, or federal campaigns.
Are PAC donations tax deductible?
No. Donations to political action committees (PACs) are typically not tax-deductible, as they are often involved in promoting specific political agendas or candidates. However, certain contributions to PACs that engage in some non-political activities may be deductible, subject to specific IRS guidelines.
Are church donations tax deductible?
Yes. Donations to churches and other religious institutions are generally tax-deductible, provided that these organizations have obtained 501(c)(3) status. However, certain rules and limitations apply to these deductions, which donors should be aware of to ensure compliance with the IRS regulations.
IRS rules for church donations
Some key IRS rules for church donations include:
- Eligibility for deductions. To claim a tax deduction for donations to a church or religious organization, the recipient must have obtained 501(c)(3) tax-exempt status from the IRS. This status signifies that the organization operates exclusively for religious, charitable, scientific, literary, or educational purposes, among others, as specified in the IRS regulations.
- Substantiation of donations. Donors are responsible for maintaining proper documentation, such as bank records, receipts, or written acknowledgments from the recipient organization, to substantiate their contributions. For any single contribution of $250 or more, donors must obtain a written acknowledgment from the church or religious organization, specifying the donation amount, the date of the contribution, and a statement confirming whether any goods or services were received in return.
- Donation limits. The IRS imposes certain limitations on the amount of charitable contributions that individuals can deduct on their tax returns. These limits are subject to the donor’s Adjusted Gross Income (AGI) and can vary depending on the type of donation and the recipient organization’s classification.
- Non-cash donations. Donations of non-cash items, such as clothing, furniture, or other goods, must meet specific IRS guidelines for valuation and documentation. Donors should carefully assess the condition and fair market value of these items to ensure compliance with IRS regulations.
- Appraisal requirements. For certain non-cash donations, such as property or assets other than cash, donors may be required to obtain a qualified appraisal to determine the value of the contribution. The IRS has specific guidelines for obtaining appraisals, and donors must adhere to these requirements to support their tax deductions.
- Recordkeeping requirements. Both donors and recipient organizations are required to maintain accurate records of all contributions and related transactions. Donors should retain documentation, such as receipts, bank statements, and written acknowledgments, for at least three years from the date of filing their tax returns.
By complying with the IRS guidelines and maintaining accurate records, donors can ensure that their charitable contributions to churches and religious organizations are appropriately documented and eligible for tax benefits.
Can you claim tithes on taxes?
Tithes, which are religious contributions typically amounting to 10% of one’s income, can be claimed as a tax deduction if the donations are made to qualifying religious institutions. However, donors (including small businesses) must ensure that they meet the IRS requirements for documentation and verification.
Tithes should be itemized on Schedule A if they amount to more than the standard deduction.
Do churches report donations to the IRS?
Churches and religious organizations are not required to report individual donations to the IRS. However, they are expected to maintain accurate records of contributions received and provide appropriate documentation to donors for tax purposes upon request.
Are GoFundMe donations tax deductible?
No. GoFundMe donations are typically considered personal gifts and are not eligible for tax deductions, as they are not made to qualifying charitable organizations. Individuals contributing to personal fundraisers on GoFundMe should be aware that these donations do not offer any tax benefits.
Are donations to the ACLU tax deductible?
No. The American Civil Liberties Union (ACLU) is a nonprofit organization with 501(c)(4) status, which means that donations made to the ACLU are not tax-deductible. Unlike 501(c)(3) organizations, donations to 501(c)(4) organizations, such as the ACLU, do not qualify for tax deductions.
Donations to the ACLU Foundation, however, are tax deductible.
Are donations to Planned Parenthood tax deductible?
Planned Parenthood Federation of America is a 501(c)(3) nonprofit organization, making donations to Planned Parenthood tax-deductible, subject to IRS guidelines. However, donors should verify the organization’s status and follow the necessary documentation requirements to claim deductions.
Helping clients with non-charity donations on their tax returns
Navigating the tax implications of donations to non-charity organizations can be complex, requiring a comprehensive understanding of the specific rules and regulations set by the IRS. Tax advisors and financial professionals play a crucial role in assisting clients with understanding the tax implications of their contributions and ensuring compliance.
While giving to non-charity organizations may not always offer the same tax benefits as charitable donations, understanding the nuances of tax deductions and regulations is essential for individuals and organizations seeking to contribute to various causes while managing their tax liabilities effectively.
Thomson Reuters® UltraTax CS ensures ease of use when calculating your clients’ donations to non-charity organizations, while optimizing your firm’s tax planning and preparation workflow.
