Fundraising Auctions and Events
Are donations of art, wine, theatre tickets, and other tangible property tax deductible?
Donors may be able to claim a tax deduction for gifts of fine art, wine, tickets (e.g.) theatre, opera, sporting events, entertainment, etc.) and other tangible property to be auctioned at a fundraising event. IRS Publication 561 has more information.
When does a donor need an appraisal?
Some donated property must have a qualified appraisal to determine the fair market value, such as book collections, fine art, jewelry (gems and precious metals), boats, and real estate. Generally, you will need an appraisal for donations of property for which you claim a deduction of $5,000 or more. Please see IRS Bulletin 2006-46 – Guidance Regarding Appraisal Requirements for Non-cash Gifts.
What are the rules for donating a vehicle?
Special rules apply to vehicles. The amount a donor may deduct for a vehicle contribution depends upon what the charity does with the vehicle as reported in the written acknowledgment sent by the charity. Charities typically sell the vehicles that are donated to them. If the charity sells the vehicle, generally the deduction is limited to the gross proceeds from the sale. However, there are certain exceptions, and you can learn more about them in IRS Publication 4303 “Donor’s Guide to Vehicle Donations”.
Are donations of services tax deductible?
No tax deduction is allowed for the donation of your personal or professional services to a charitable organization or the value of your time spent volunteering. However, you may be able to take a deduction for travel expenses including air, rail or bus transportation, out of pocket expenses for car, taxi fares or other costs of transportation. See IRS Publication 526 for more information.
How much can be claimed as a tax benefit when goods or services are received in exchange for the donation?
The IRS limits the amount you can claim as a deduction when goods or services are received by the donor in exchange for the donation. For example, if a donor gives a charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. In this example, the charitable contribution part of the payment is $60 which is the amount of the contribution made in excess of the value of goods received. It is the responsibility of the organization to make a good faith estimate of the value of the goods and services received. See IRS Publication 1771 – Charitable Contributions, for more information.
What type of documentation is required by the IRS to claim federal tax deductions for noncash gifts?
Generally, donors must have written documentation to support their tax deduction for noncash gifts. Varying levels of documentation are required depending on the value of the donation. If the donor claims:
- $250 or less - written records and a receipt (if practical) from the tax-exempt organization(s) are required to support the deduction.
- More than $250 and up to $500 - written records and a written acknowledgement from the tax-exempt organization(s), as described in the next question, are required to support the deduction.
- More than $500 and up to $5,000 of noncash donations - IRS Form 8283, Section A, is required as an attachment to their tax return. In addition, written records and a written acknowledgement from the tax-exempt organization(s) are required to support the deduction.
- More than $5,000 in non-cash contributions - in addition to Form 8283, written records, a written acknowledgement, and a qualified appraisal are required.
See IRS Publication 1771.
Is the recipient organization required to provide the donor with a receipt?
Tax-exempt organizations generally must provide the donor with an acknowledgement (without stating the value of the non-cash donation) to enable donors to claim the tax deduction. The organization is not responsible for determining the fair market value of donated items. The law imposes a penalty on a charity that does not provide the required acknowledgement. However, when donors drop off items worth $250 or less at unattended donation locations, an acknowledgement is not required.
A tax-exempt organization is required to provide written documentation to support the deduction and must include the following information:
- The name, address, and tax ID number of the tax-exempt organization
- Date and location of the gift
- Description (list of specific items)
- Affirmation that no goods or services were received in exchange for the gift.
A written acknowledgement may be provided at the time the donation is made, or by January 31st of the following year. The written acknowledgement can be either a paper document or in electronic format, such as an e-mail addressed to the donor.
There are examples of written acknowledgements, follow the link to IRS Publication 1771.
What is an IRS Form 8283?
The donor must file Form 8283 if the amount of their deduction for all noncash gifts is valued at more than $500. Form 8283 has two sections. Use Section A to report donations of property of $5,000 or less. Use Section B for donations of more than $5,000. Fair Market Value (FMV) is the price a willing, knowledgeable buyer would pay a willing, knowledgeable seller when neither has to buy or sell.
The donor is responsible to prepare the form and the tax exempt organizations only obligation is to complete the “Donee Acknowledgement” section in Part IV. The person acknowledging the gift must be an official authorized to sign the tax returns of the organization or a person specifically designated to sign Form 8283. There are a number of additional requirements so for more information it is highly recommended that the organization see the IRS Instructions for Form 8283.
Is the recipient organization required to provide written documentation when non-deductible items are donated?
Charitable donations must meet specific criteria with the IRS to be tax deductible. The IRS does not require a charitable organization to provide a written acknowledgement of a donation that is not tax-deductible. If an organization receives a non-deductible item, then it should not provide a donor acknowledgement that might be mistakenly used to claim a tax deduction, but the organization can still thank the donor for the gift. For example, some organizations modify their normal thank you letter to state that the item is not tax deductible but that they appreciate the gift.