Americans are an incredibly charitable group. According to a 2015 study done by The Giving Institute1, Americans donated $373 billion to charitable causes, and $268 billion of that was given by individuals.
To benefit these charitable individuals, the IRS provides a charitable contribution deduction. But be aware, there are some very specific stipulations that must be followed, or your charitable contribution won’t count in the eyes of the IRS.
Must Have a Gift Receipt
In order to receive a charitable contribution deduction for any donation over $250, you must obtain a charitable receipt from all qualifying charities that you donate to. Specifically, you must obtain a contemporaneous written acknowledgement or CWA. While smaller or inexperienced charities may be inclined to give you a thank you letter, payroll stub, credit card receipt, or other statement, these alone will not be enough.
In order to have your contemporaneous written acknowledgement accepted by the IRS, it must include the following criteria:
1. The name of the charity
2. The date of the contribution
3. The amount of the cash contribution to the charity
4. A description of any non-cash contribution (not including the value)
5. A statement regarding whether or not any goods or services were provided in exchange for the contribution
6. If applicable, the value of the goods or services provided by the charity to the donor
What You Should Know about the Requirements
To ensure you will receiving your charitable contribution deduction, there are a few details you should know about the CWA requirements.
Naming the Charity
Though donor receipts may include the charity’s EIN and address, all you technically need is the charity’s name and name of the donor. However, the donor is expected to have a copy of the charity’s address in their records, so it doesn’t hurt to have it on the receipt.
Date of Contribution
While the date of the contribution does not technically need to be on the donor receipt, the requirement does state that the donor must have a record of the date of their donations. Unless the donor is well-organized, most people don’t keep an accurate record of these dates. When this record is missing, the IRS allows the donor to use the donor receipt in lieu of a record to show the contribution date. If the donor’s record is not accepted by the IRS and the receipt also doesn’t have a date, the contribution will be rejected by the IRS.
Amount of Cash Contribution
This requirement is simple. For cash donations, the receipt should mention that cash was received, and the value should be included. Cash value should only be included with cash donations.
Description of Noncash Donation
For noncash donations, the charity should never put down the cash value of the item on the receipt. The donor is responsible for obtaining the value of the noncash donation, not the charity.
Statement of Goods or Services Provided
This provision is incredibly important, as the IRS still requires some language regarding this requirement, even if no goods or services were provided by the charity. In this case, something as short as “no goods or services were provided in exchange for this donation” will meet the requirement. Without this wording, the IRS has been known to throw out deductions to donors.
If the charity does provide a good or service, this must also be documented, even if those services are intangible (ex. A religious service). In this case, you would state simply that – the charity provided intangible benefits to the donor.
Value of Goods or Services Provided by Charity
If applicable, the charity is required to provide the value of the goods or services they provide the donor should there be any. If this is the case, the charity must note that the donor’s deduction may be limited.
Though relatively basic, these requirements are incredibly important to remember when making a charitable donation. Missing just one can cause the donor or charity to face a penalty. We encourage you to always review your charitable donation receipts for these requirements, or reach out to your financial advisor if you still have questions. Feel free to contact us with any questions you may have regarding your charitable contribution, we’re happy to help.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.