Charitable Donation Form - What To Look For  

  1. Sections
  2. Tax Exempt or Tax Deductible Charitable donation
  3. Letter of Determination
  4. Deducting Charitable Contribution Form Tips
  5. Tax Exemption Categories
One benefit for businesses supporting worthwhile causes is the ability to sometimes be able to take a federal income tax deduction. There are many things you should know when considering charitable donations and reviewing charitable donation forms. When you have the chartitable donation from in your hands, keep in mind the Council of Better Business Bureaus offers some helpful tips to help you decide which charitable organizations to support:
 
Tax Exempt or Tax Deductible Charitable Donation
 
·         “Tax exempt” does not always mean “tax deductible.” Tax exempt organizations do not have to pay income taxes. Contributions to some tax exempt organizations may be deductible. You can determine tax exempt status by contacting your local IRS office or by asking the organization to provide you with a copy of its “Letter of Determination.” This is a formal tax exempt status notification from the IRS.
 
Deducting Charitable Contribution Tips
 
  • Contributions are only deductible the year they are actually paid or delivered. Pledges are deductible the year they are paid. Save your charitable donation forms for your records.
  • Contributions to foreign organizations are not deductible, with the exception of some Canadian organizations. Please note donations to charities in the Virgin Islands, Puerto Rico and other U.S. possessions are deductible, as long as they meet requirements for exemption under the United States tax laws.
  • Donated property can generally be deducted at its fair market value at the time of the contribution. Gifts of appreciated property are subject to special rules.
  • The value of volunteer time or services to an organization is not deductible. However, expenses related to such services are usually deductible.
  • Contributions when the donor receives a gift or other benefits are deductible to the extent the donation exceeds the value of any benefit received by the donor.
  • Contributions to needy individuals are not tax deductible. They must be made to a specific organization.
  • "Fair market value” of items donated to thrift stores is deductible when the store is operated by a charity.
  • The IRS can answer questions about deducting contributions. Visit them online at www.IRS.gov.
Tax Exemption Categories
 
Organizations that solicit donations normally fall into one of four tax exempt categories. These numbers correspond to the sections of the Internal Revenue Code that describes them:
 
501(c)(3) – Nonprofits must file documents with the IRS that prove they are operated for certain charitable purposes. They are classified as public charities or private foundations and include groups whose purposes are:
  • Charitable
  • Religious
  • Scientific
  • Educational
  • Promotion of national or international amateur sports competition
  • Testing for public safety 
  • Literary
  • Prevent cruelty to children and animals
501(c)(4) – Organizations that perform legislative lobbying for specific issues and engage in social welfare activities. Civic associations, some volunteer fire departments and local associations of employees are also included. Contributions may be deductible as a business expense, and are only deductible as charitable donations for volunteer fire companies and war veterans’ organizations.
501(c)(6) – Organizations include business leagues, chambers of commerce, trade associations, boards of trade and estate boards. Contributions are not deductible as charitable donations, but can be deducted as a business expense by the taxpayer if they are considered necessary and ordinary in the context of their business.
 
501(c)(19) – Created for veterans’ organizations. Contributions are generally deductible as charitable donations for federal income tax purposes as long as at least 90% of its members are veterans.
 
This information should be helpful when determining how to assess charitable donation forms and which charitable organizations you and your company should support.
 
 Modern Business Associates is an HR company that focuses on payroll and HR outsourcing.  We routinely work with clients on payroll and taxes. As a Professional Payroll and HR outsource organization, our clients rely on us to help them effectively deal with these kinds of topics.