You may have recently begun receiving letters from the charities you donated to last year. Now you’re thinking, what do I do with this letter? What if I haven’t received such a letter, can I still claim a deduction for the gift on my 2021 income tax return?
It depends.
The requirements
To prove a charitable donation for which you claim a tax deduction, you need to comply with IRS substantiation requirements. For a donation of $250 or more, this includes obtaining a contemporaneous written acknowledgment from the charity stating the amount of the donation, whether you received any goods or services in consideration for the donation and the value of any such goods or services.
“Contemporaneous” means the earlier of:
- The date you file your tax return, or
- The extended due date of your return.
Therefore, if you made a donation in 2021 but haven’t yet received substantiation from the charity, it’s not too late — as long as you haven’t filed your 2021 return. Contact the charity now and request a written acknowledgment.
Keep in mind that, if you made a cash gift of under $250 with a check or credit card, generally a canceled check, bank statement or credit card statement is sufficient. However, if you received something in return for the donation, you generally must reduce your deduction by its value — and the charity is required to provide you a written acknowledgment as described earlier.
Temporary deduction for nonitemizers is gone
In general, taxpayers who don’t itemize their deductions (and instead claim the standard deduction) can’t claim a charitable deduction. Under the COVID-19 relief laws, individuals who don’t itemize deductions can claim a federal income tax write-off for up to $300 of cash contributions to IRS-approved charities for the 2021 tax year. This deduction is $600 for married joint filers for cash contributions made in 2021. Unfortunately, the deduction for nonitemizers isn’t available for 2022 unless Congress acts to extend it.
Additional requirements
Additional substantiation requirements apply to some types of donations. For example, if you donate property valued at more than $500, a completed Form 8283 (Noncash Charitable Contributions) must be attached to your return or the deduction isn’t allowed.
And for donated property with a value of more than $5,000, you’re generally required to obtain a qualified appraisal and to attach an appraisal summary to your tax return.
Please contact your Rudler, PSC advisor at 859-331-1717 for help determining whether you have sufficient substantiation for the donations you hope to deduct on your 2021 income tax returns. We can also help you ensure you receive the substantiation you need to deduct any future donations you plan to make.
RUDLER, PSC CPAs and Business Advisors
This week's Rudler Review is presented by Becca Thorman, CPA and John Wood, CPA, CVA.
If you would like to discuss your particular situation, contact Becca or John at 859-331-1717.
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