So You Think You Can Deduct Your Donation? These Ineligible Contributions Might Surprise You
You may think that a nonprofit donation will give back with a deduction come tax time, but not all contributions can cut you that break.
The type of establishment you donate to, as well as the type of gift offered, both play a role in deduction eligibility.
How Do I Know If a Charity Is Eligible for Possible Deductions?
Many nonprofits under section 501(c)(3), as well as others under section 170(c), are often eligible, such as religious institutions or volunteer fire departments. On the other hand, organizations under section 501(c)(4) are often restricted from write-offs, including civic and social welfare establishments.
Also, donations to certain private factions may come with limited credit options, such as fraternal societies or veterans' foundations. In addition, some organizations are exceptions to normally ineligible institutions, and are still qualified for review.
Unfortunately, many tax payers are unaware that their gifts won't result in tax breaks later. Some of the most common misconceptions include:
- Funds donated to political candidates, committees, or their campaigns
- Fundraising for funeral costs, medical expenses, and other community efforts
- Raffle tickets or lottery drawings used to raise funds
Additionally, if the contributor received any products or services in return from their donation, only the portion beyond the value of that product or service is deductible. Reciprocated benefits, everything from a gift basket to a free trip abroad, disqualify the donation from a full credit.
Remember, there are many details that apply when it comes to determining your eligibility for a write-off. To ensure you are taking advantage of your tax opportunities, contact H&J's nonprofit professionals to maximize your return this season.
Rolland Standish has over 25 years in public accounting and is the partner-in-charge of H&J's broad non-profit client base - cultural, social, churches, trade associations, unions and many more - located in Northern Ohio, New York, and New Jersey. An active volunteer, Rolly has held leadership positions in area non-profits, including the Arthritis Foundation, LakewoodAlive, and WIRE-net.