Because donations to charity of cash or property generally are tax deductible (if you itemize), it only seems logical that the donation of something even more valuable to you — your time — would also be deductible. Unfortunately, that is not the case; however, you can potentially deduct out-of-pocket costs associated with your volunteer work.

The basic rules

As with any charitable donation, for you to be able to deduct your volunteer expenses, the first requirement is that the organization be a qualified charity. You can use the IRS’s Tax Exempt Organization Search tool to find out.

Assuming the charity is qualified, you may be able to deduct out-of-pocket costs that are:

Supplies, uniforms and transportation

A wide variety of expenses can qualify for the deduction. For example, supplies you use in the activity may be deductible. As well as, the cost of a uniform you must wear during the activity may also be deductible (if it is required and not something you wear when not volunteering).

Transportation costs to and from the volunteer activity generally are deductible, either the actual cost or 14 cents per charitable mile driven, but you have to be the volunteer. If, say, you drive your elderly mother to the nature center where she is volunteering, you cannot deduct the cost.

You also cannot deduct transportation costs you would incur even if you were not volunteering. For example, if you take a commuter train downtown to work, then walk to a nearby volunteer event after work and take the train back home afterwards, you will not be able to deduct your train fares. But, if you take a cab from work to the volunteer event, then you potentially can deduct the cab fare for that leg of your transportation.

Volunteer travel

Transportation costs may also be deductible for out-of-town travel associated with volunteering. This can include:

Lodging and meal costs also might be deductible.

The key to deductibility is that there is no significant element of personal pleasure, recreation or vacation in the travel. That said, according to the IRS, the deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. But you must be volunteering in a genuine and substantial sense throughout the trip. If only a small portion of your trip involves volunteer work, your travel expenses generally will not be deductible.

Volunteer Time

Donations of time or services are not deductible. It does not matter if it is simple administrative work, such as checking in attendees at a fundraising event, or if it is work requiring significant experience. Regardless of the service being costlier to the charity if it had to pay for it, such as skilled carpentry or legal counsel, this volunteered time is still not deductible.

Keep careful records

The IRS may challenge charitable deductions for out-of-pocket costs, so it is important to keep careful records. If you have questions about what volunteer expenses are and are not deductible, please contact your tax adviser.

With the end of the year on the horizon, your supporters may be thinking about making charitable contributions they can deduct on their 2017 federal tax returns. If a nonprofit wants to keep donors on its side, it needs to explain that different types of donations can carry different tax benefits and that some donations are not deductible at all.

What can be deducted?

Generally, donors can deduct contributions of money or property. The amount of the allowable deduction varies based on the type of donation:

Cash. Cash donations are 100% deductible, including donations made by check, credit card or payroll deduction.

Ordinary income property. Donations of this type are generally limited to the donor’s tax basis in the property (usually the amount the donor paid for it). Specifically, donors can deduct the property’s fair market value less the amount that would be ordinary income or short-term capital gains if they sold the property at fair market value (FMV).

Property is ordinary income property when the donor recognizes ordinary income or short-term capital gains if he or she sold it at FMV on the date of donation. Examples include inventory, donor-created works of art, and capital assets (for example, stocks and bonds) held for one year or less.

Capital gains property. Donors of capital gains property can usually deduct the property’s fair market value. Property is considered capital gains property if the donor would have recognized long-term capital gains had he or she sold it at FMV on the donation date. This includes capital assets held more than one year. But there are certain situations where only the donor’s tax basis of the property may be deducted, such as when the donation is intellectual property (for instance, a patent or copyright) or, interestingly, “certain taxidermy property.”

Tangible personal property. As the name implies, tangible personal property can be seen or touched. Examples include furniture, books, jewelry and paintings. If your nonprofit uses the donated property for its tax-exempt purpose — for example, a museum displays a donated painting — the donor can deduct its fair market value. But if the property is put to an unrelated use — for example, a nonprofit children’s hospital sells the donated painting at its charitable auction — the deduction is limited to the donor’s basis in the property.

Vehicles. Generally, if a vehicle has an FMV greater than $500, the donor can deduct the lesser of the gross proceeds from its sale by the organization or the FMV on the donation date. But if the nonprofit uses the vehicle to carry out its tax-exempt purpose — for instance, an animal welfare organization that uses a donated van to transport rescued dogs and cats — the donor can deduct the FMV. Make sure you provide Form 1098-C, which your donor must attach to his or her tax return to take the deduction.

Use of property. Say a supporter donates a one-week stay at his vacation home for an auction. Unfortunately, he cannot take a deduction because generally only donations of the full ownership interest in property are deductible. The right to use property is considered a contribution of less than the donor’s entire interest in the property. But there are some situations in which a donor can receive a deduction for a partial-interest donation, such as with a qualified conservation easement.

Donors also might want to claim a deduction for the donation of their services, such as when a hair stylist donates one free haircut and color for your auction, or a graphic designer lays out each issue of your quarterly newsletter for free. These types of donations are not deductible as contributions, only as normal costs of doing business. But the related out-of-pocket costs, such as supplies and miles driven for charitable purposes (14 cents per mile), are deductible as charitable contributions.

Help donors help you out

Be aware that there are additional limits on charitable deductions. Proposed tax law changes could also affect charitable deductions, though most likely not for 2017. So keep an eye on federal developments in Washington.

While tax education may seem beyond your responsibility, you cannot afford disgruntled donors. Taking the time to make sure your donors understand the tax implications of their gifts can avoid unpleasant surprises down the road, and keep donors on board as long-term supporters.

 

What other limits apply to charitable deductions?

As you probably know, there’s a limit to the amount of charitable deductions a taxpayer can claim in a given year. The taxpayer’s total deduction generally cannot exceed 50% of his or her adjusted gross income (AGI). (A higher limit applies for certain qualified conservation contributions.) But donations of capital gains property are generally limited to 30% of AGI.

In some cases, the limits are even lower. For example, deductions for contributions to certain private foundations, veterans’ organizations, fraternal societies and cemetery organizations are limited to 30% of AGI. And capital gains property contributions to such organizations are limited to 20% of AGI.

Colorado Secretary of State Wayne Williams recently urged Coloradans to be mindful when making a donation to Hurricane Harvey relief efforts.

“It is important for Coloradans to research the charities they support and trust that their donations are being used prudently,” he said.

Williams shared 10 tips to avoid charity scams.

10 tips to avoid charity scams

  1. Ask for the registration number of the charity and paid solicitor.
  2. Make a note of the individual caller’s first and last name and the name of the telemarketing company that employs the caller.
  3. Ask the solicitor how much of the donation will go to the charity, whether the donation is tax deductible, and what charitable programs it will support.
  4. If solicited in person, ask for the solicitor’s identification and registration number.
  5. Resist pressure to give on the spot, whether from a telemarketer or door-to-door solicitor, and beware if they thank you for making a pledge you don’t remember making. If you feel uncomfortable, just say, “No, thank you.”
  6. Do not pay in cash. Donate by check made payable to the charity or use the charity’s website to donate by credit card.
  7. Make sure you are visiting the official website of the charity you wish to support, and beware of lookalike websites, especially if you are asked to provide personal financial information.
  8. Research the charity’s disclosure and financial statements on the Secretary of State’s website.
  9. Be wary if the charity fails to provide detailed information about its identity, mission, finances and how the donation will be used. Reputable charities will gladly provide the information requested.
  10. Watch out for charities with names that sound similar to well-known organizations. These sound-alike names are intended to confuse.

 

If you have tax questions about donating to the hurricane relief efforts, please call your tax professional.

 

Donations to qualified charities are generally fully deductible, and they may be the easiest deductible expense to time to your tax advantage. After all, you control exactly when and how much you give. To ensure your donations will be deductible on your 2016 return, you must make them by year end to qualified charities. 
 

When’s the delivery date?

 
To be deductible on your 2016 return, a charitable donation must be made by Dec. 31, 2016. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean? Is it the date you, for example, write a check or make an online gift via your credit card? Or is it the date the charity actually receives the funds — or perhaps the date of the charity’s acknowledgment of your gift?
 
The delivery date depends in part on what you donate and how you donate it. Here are a few examples for common donations:
 

Is the organization “qualified”?

 
To be deductible, a donation also must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions. 
 
The IRS’s online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access EO Select Check at https://www.irs.gov/charities-non-profits/exempt-organizations-select-check  Information about organizations eligible to receive deductible contributions is updated monthly.
 
Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering making. But act soon — you don’t have much time left to make donations that will reduce your 2016 tax bill.

 

Individuals

Charitable Deductions

Summertime means cleaning out those often neglected spaces such as the garage, basement, and attic for many of us. Whether clothing, furniture, bikes, or gardening tools, you can write off the cost of items in good condition donated to a qualified charity. The deduction is based on the property's fair market value. Guides to help you determine this amount are available from many nonprofit charitable organizations.

Charitable Travel

Do you plan to travel while doing charity work this summer? Some travel expenses may help lower your taxes if you itemize deductions when you file next year:
  1. You must volunteer to work for a qualified organization. Ask the charity about its tax-exempt status. 
  2. You may be able to deduct unreimbursed travel expenses you pay while serving as a volunteer. You can’t deduct the value of your time or services.
  3. The deduction qualifies only if there is no significant element of personal pleasure, recreation or vacation in the travel. However, the deduction will qualify even if you enjoy the trip.
  4. You can deduct your travel expenses if your work is real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.
  5. Deductible travel expenses may include:

    • Air, rail and bus transportation
    • Car expenses
    • Lodging costs
    • The cost of meals
    • Taxi fares or other transportation costs between the airport or station and your hotel

Renting Your Vacation Home

A vacation home can be a house, apartment, condominium, mobile home or boat. If you rent out a vacation home, you can generally use expenses to offset taxable income from the rental. However, you can't claim a loss from the activity if your personal use of the home exceeds the greater of fourteen days or 10% of the time the home is rented out. Watch out for this limit if taking an end-of summer vacation at your vacation home. 
 

Businesses

Traveling for Business

When you travel away from home, you may deduct your travel expenses – including airfare, train, bus, taxi, meals (generally limited to 50%), lodging – as long as the primary purpose of the trip is business-related. You might have some downtime relaxing, but spending more time on business activities is critical. Note that the cost of personal pursuits is not deductible.

Entertaining Clients

If you treat a client to a round of golf at the local club or course, you may deduct qualified expenses – such as green fees, club rentals, and 50% of your meals and drinks at the nineteenth hole – as long as you hold a "substantial business meeting" with the client before or after the golf outing. The discussion could take place a day before or after the entertainment if the client is from out of state. For information on what does and does not qualify, please contact us.

Using Your Home Office  

Home office expenses are generally deductible if part of a business owner's personal residence is used regularly and exclusively as either the principal place of business or as a place to meet with patients, customers or clients. The IRS provides an optional safe-harbor method that makes it easier to determine the amount of deductible home office expenses. These rules allow you to deduct $5 per square foot of home office space (up to 300 square feet). In addition, deductions such as interest and property taxes allocable to the home office are still permitted as an itemized deduction for taxpayers using the safe harbor.

IRS substantiation rules apply to contributors

Your donors are gearing up for tax-filing season soon. It’s not too late to make sure that your organization is following the IRS donation “substantiation rules” so that your benefactors have the proof they need to deduct financial gifts. Proper documentation is also crucial so that your donors don’t have any future problems with the IRS.

Legal precedents exist

Case law generally supports the IRS. In the court ruling Durden v. Commissioner, a church had received $25,171 in contributions from a married couple. The taxpayers had canceled checks documenting these 2007 donations, and the church sent them a written acknowledgment of receipt. But the acknowledgment didn’t note whether the taxpayers had received any goods or services in exchange for their contributions. The IRS requires such a statement, so it disallowed the taxpayers’ deduction.

The taxpayers then obtained a second receipt from their church, stating that they hadn’t received any goods or services in exchange for their donations. The second receipt was dated June 21, 2009, and the IRS rejected it for failing to meet the “contemporaneous” requirement, which requires the notification to be obtained at the time of the gift.

The taxpayers appealed the IRS decision. Concluding that the couple had “failed strictly or substantially to comply with the clear substantiation requirements of Section 170(f)(8),” the Tax Court upheld the IRS’s disallowance of the deduction.

What’s required by the IRS?

For donors’ charitable contributions to be eligible for deductions on their income tax returns, they must follow the IRS “substantiation rules.” These requirements vary with the nature and amount of the donation, but clearly state that, if a taxpayer fails to meet the substantiation and recordkeeping requirements, no deduction will be allowed.

For cash gifts of under $250, a canceled check or credit card receipt is generally sufficient substantiation. If, however, any goods or services were provided in exchange for a cash gift of $75 or more, the charity must provide a contemporaneous written acknowledgment that includes a description and good-faith estimate of the value of the goods or services.

For cash gifts of $250 or more, as well as noncash gifts of $500 up to $5,000, the rules generally also require a contemporaneous written acknowledgment from the charity, which must include these four elements: 1) the donor’s name, 2) the amount of cash or a description of the property contributed (separately itemized if one receipt is used to acknowledge two or more contributions), 3) a statement explaining whether the charity provided any goods or services in consideration, in whole or in part, for the gift, and 4) if goods or services were provided, a description and good-faith estimate of their value.

If the only benefit the donor received was an “intangible religious benefit,” this must be stated. Goods or services of “insubstantial value,” such as address labels or other small incentives in a fundraising campaign, don’t need to be taken into account.

The requirements for noncash donations valued over $500 include attaching a completed Form 8283 to the donor’s tax return and, if valued over $5,000, include obtaining a qualified appraisal of the donated property. Before you accept such donations, it may be wise to confirm with the donors that they are aware of the requirements and have obtained an appraisal, if necessary.

Quid pro quo

A donation at the end of the year might be your supporters’ holiday gift to your nonprofit. Make sure that you reciprocate by giving them credit and verifying that their donations are properly documented.

Planning on making charitable donations before the end of the year?

If you are, you should know that a charitable contribution of long-term appreciated securities — i.e. stocks, bonds and/or mutual funds that have realized significant appreciation over time — is one of the most tax-efficient ways to give.  The IRS has generous rules governing the treatment of charitable donations of appreciated securities, increasing the popularity of this method of giving in recent years. By simultaneously allowing you to maximize your charitable impact and minimize taxes incurred, this best of both worlds situation provides you with greater flexibility in planning how to utilize your charitable resources.

Key Advantages

Donating long-term appreciated securities directly to charity — rather than selling the assets and then donating the cash proceeds — has two key advantages:

The Basic Rules

The general rule when contributing to public charities is that taxpayers are allowed to take a deduction for the full FMV of donated securities, held for a period greater than one year, rather than deducting only their basis in the property. This deduction is allowed for up to 30% of the donor’s adjusted gross income (AGI). The best part is that the taxpayer does not have to recognize, or pay taxes resulting from, any gain in value on the donated security. This essentially allows you to take the same amount of deduction as you would if you had sold securities and donated the cash proceeds, but without being taxed on the gain resulting from the sale of appreciated assets. Also, deductions from FMV contributions allowed for regular tax purposes are not decreased for computing alternative minimum tax.

Donations to Private Foundations 

The rules are slightly different when the contribution is made to a private foundation. Donations to private foundations, other than private operating foundations, must consist of “qualified appreciated stock.” Donations of publically traded securities with a holding period greater than one year, such as stocks that do not exceed 10% in value of the corporation’s total outstanding stock, shares in mutual funds and American Depository Shares (ADSs)  generally meet the requirements to be considered qualified appreciated stock. The primary requirement is that the items are actively traded and/or the value of these items is readily available through an established securities market.
 
Please feel free to contact us and we can help you to maximize your charitable impact during this holiday season and beyond.

Donating a car or vehicle to charity can be a great way for taxpayers to get a large deduction on their income tax returns. Prior to January 2005, the IRS allowed taxpayers to take a tax deduction based solely on their vehicle's market value. Determining the market value of a donated vehicle was often quite difficult and time-consuming, which made determination of the amount of the tax deduction confusing.

Fortunately, as a result of the tax law that went into effect in January 2005, the IRS has taken the guesswork out of determining the value of your donated car, truck, RV, boat or other vehicle. Generally, if the charity sells your vehicle, your deduction is limited to the gross proceeds the charity receives from its sale.

Determining Fair Market Value

If the charity intends to make significant intervening use of the vehicle, a material improvement to the vehicle, or intends to give or sell the vehicle to a needy individual at a price significantly below fair market value, you will need to determine your vehicle's fair market value as of the date of the contribution.

Fair market value is the price a willing buyer would pay and a willing seller would accept for the vehicle when neither party is compelled to buy or sell nor has reasonable knowledge of the relevant facts.

If you use a vehicle pricing guide to determine fair market value, be sure that the sales price listed is for a vehicle that is

Moreover, the fair market value of a vehicle cannot exceed the price listed for a private-party sale.

Steps to Take Before Donating

State charity officials recommend that the donor take responsibility for transfer of title to ensure termination of liability for the vehicle. In most states, this involves filing a form with the state motor vehicle department which states that the vehicle has been donated. A taxpayer donating a vehicle in Colorado need only complete a vehicle title transfer with their local Department of Motor Vehicles.  

If you are considering donating a vehicle to charity and have further questions on the tax deduction you will be receiving, don't hesitate to reach out to us with any questions or concerns.

The federal government supports generosity by allowing you to deduct your charitable donations on your income tax return if you itemize deductions. You must, however, follow the IRS's reporting and substantiation rules to assure your charitable deduction is allowed. While all contributions must be susbstantiated, there are numberous and overlapping requirements.

General Rules

For a contribution of cash, check or other monetary gift, regardless of amount, you must maintain a bank record or a written communication from the donee organization showing its name, date and amount of the contribution. Any other type of written record, such as a log of contributions, is insufficient. 

For a contribution of property other than money, you generally must maintain a receipt from the donee organization that shows the organization's name, the date and location of the contribution, and a detailed description (but not the value) of the property. If circumstances make obtaining a receipt impracticable, you must maintain a reliable written record of the contribution. the information required in such a record depends on factors such as the type and value of property contributed.

Contributions over $250

If the contribution is worth $250 or more, stricter substantiation requirements apply. No charitable deduction is allowed for any contribution of $250 or more unless you substantiate the contribution with a written receipt from the donee organization. You must have the receipt in hand when you file your return (or by the due date, if earlier) or you won't be able to claim the deduction. If you make separate contributions of less than $250, you won't be subject to the written receipt requirement, even if the sum of the contributions to the same charity totals $250 or more in a year.

The receipt must set forth the amount of cash and a description (but not the value) of any property other than cash contributed. It must also state whether the donee provided any goods or services in return for the contribution, and, if so, must provide a good faith estimate of the value of the goods or services. If you received only "intangible religious benefits," such as attending religious services, in return for your contribution, the receipt must say so. This type of benefit is considered to have no commercial value and therefore doesn't reduce the charitable deduction available.

Contributions over $500

If the total charitable deduction you claim for noncash property is more than $500, you must attach a completed Form 8283 (Noncash Charitable Contributions) to your return or the deduction is not allowed. In general, you are required to obtain a qualified appraisal for donated property with a value of more than $5,000 and attach an appraisal summary to the tax return. A qualified appraisal, however, isn't required for publicly traded securities for which market quotations are readily available. A partially completed appraisal summary and the maintenance of certain records are required for (1) non-publicly traded stock for which the claimed deduction is greater than $5,000 and no more than $10,000, and (2) certain publicly traded securities for which market quotations are not readily available. A qualified appraisal is required for gifts of art valued at $20,000 or more. The IRS may also request that you provide a photograph.

Recent Case Provides a Note of Caution to Taxpayers Related to Documentation of Noncash Charitable Contributions

As we get closer to the end of the 2015 tax year, a review of a 2015 Tax Court Memorandum Decision (TC Memo 2015-71, Kunkel v. Commissioner) provides a reminder that the IRS and the courts take the charitable contribution rules seriously and that good tax documentation is required to support a deduction for noncash charitable contributions. Here's a summary of the take-away lessons from the Kunkel case regarding documentation of noncash charitable contributions:

Recordkeeping for Contributions for which You Receive Goods or Services

If you receive goods or services, such as a dinner or theater tickets, in return for your contribution, your deduction is limited to the excess of what you gave over the value of what you received. For example, if you gave $100 and in return received a dinner worth $30, you can deduct $70. But your contribution is fully deductible if any of the following are true.

If you made a contribution of more than $75 for which you received goods or services, the charity must give you a written statement, either when it asks for the donation or when it receives it, that tells you the value of those goods or services. Be sure to keep these statements.

Cash Contribution Made Through Payroll Deductions

You can substantiate a contribution that you make by withholding from your wages with a pay stub, Form W-2, or other document from your employer that shows the amount withheld for payment to the charity.

You can substantiate a single contribution of $250 or more with a pledge card or other document prepared by the charity that includes a statement that it doesn't provide goods or services in return for contributions made by payroll deduction.

The deduction from each wage payment is treated as a separate contribution for purposes of the $250 threshold in case each individual contribution is less than the $250 threshold.

Substantiating Contributions of Services

Although you can't deduct the value of services you perform for a charitable organization, some deductions are permitted for out-of-pocket costs you incur while performing the services. You should keep track of your expenses, the services you performed, when you performed them and the organization for which you performed the services. Keep receipts, canceled checks and other reliable written records relating to the services and expenses.

As discussed earlier, a written receipt is required for contributions of $250 or more. This presents a problem for out-of-pocket expenses incurred in the course of providing charitable services, since the charity doesn't know how much those expenses were. You can, however, satisfy the written receipt requirement if you have adequate records to substantiate the amount of your expenditures, and get a statement from the charity that contains a description of the services you provided, the date the services were provided, a statement of whether the organization provided any goods or services in return and a description and good faith estimate of the value of those goods or services.

Please call us if you have any questions about these rules. Together, we can make sure that you'll get all the deductions to which you are entitled when we prepare your 2015 tax returns.

With contributions from Penny Sayre, CPA, Tax Manager

Substantiation requirements must be met for charitable donations to be allowed

General Rules

For a contribution of cash, check, or other monetary gift, regardless of amount, you must maintain a bank record or a written communication from the donee organization showing its name, plus the date and amount of the contribution. Any other type of written record, such as a log of contributions, is insufficient.

For a contribution of property other than money, you generally must maintain a receipt from the donee organization that shows the organization's name, the date and location of the contribution, and a detailed description (but not the value) of the property. If circumstances make obtaining a receipt impracticable, you must maintain a reliable written record of the contribution. The information required in such a record depends on factors such as the type and value of property contributed.

Contributions Over $250

If the contribution is worth $250 or more, stricter substantiation requirements apply. No charitable deduction is allowed for any contribution of $250 or more unless you substantiate the contribution with a written receipt from the donee organization. You must have the receipt in hand when you file your return (or by the due date, if earlier) or you won't be able to claim the deduction. If you make separate contributions of less than $250, you won't be subject to the written receipt requirement, even if the sum of the contributions to the same charity total $250 or more in a year.

The receipt must set forth the amount of cash and a description (but not the value) of any property other than cash contributed. It must also state whether the donee provided any goods or services in return for the contribution, and if so, must give a good faith estimate of the value of the goods or services. If you received only “intangible religious benefits,” such as attending religious services, in return for your contribution, the receipt must say so. This type of benefit is considered to have no commercial value and so doesn't reduce the charitable deduction available.

Contributions Over $500

In general, if the total charitable deduction you claim for non-cash property is more than $500, you must attach a completed Form 8283 (Noncash Charitable Contributions) to your return or the deduction is not allowed. In general, you are required to obtain a qualified appraisal for donated property with a value of more than $5,000, and to attach an appraisal summary to the tax return. However, a qualified appraisal isn't required for publicly-traded securities for which market quotations are readily available. A partially completed appraisal summary and the maintenance of certain records are required for (1) nonpublicly-traded stock for which the claimed deduction is greater than $5,000 and no more than $10,000, and (2) certain publicly-traded securities for which market quotations are not readily available. A qualified appraisal is required for gifts of art valued at $20,000 or more. IRS may also request that you provide a photograph.

Recent Case Provides a Note of Caution to Taxpayers Related to Documentation of Noncash Charitable Contributions

As we begin the new tax year of 2015, a review of a 2014 Tax Court Memorandum Decision (TC Memo 2014-203, Thad D. Smith v. Commissioner) provides a reminder that the IRS and the courts take the charitable contribution rules seriously and that good tax documentation is required to support a deduction for noncash charitable contributions. Here’s a summary of the take-away lessons from the Smith case regarding documentation of noncash charitable contributions:

Recordkeeping for Contributions for which You Receive Goods or Services

If you receive goods or services, such as a dinner or theater tickets, in return for your contribution, your deduction is limited to the excess of what you gave over the value of what you received. For example, if you gave $100 and in return received a dinner worth $30, you can deduct $70. But your contribution is fully deductible if:

If you made a contribution of more than $75 for which you received goods or services, the charity must give you a written statement, either when it asks for the donation or when it receives it, that tells you the value of those goods or services. Be sure to keep these statements.

Cash Contribution Made through Payroll Deductions

You can substantiate a contribution that you make by withholding from your wages with a pay stub, Form W-2, or other document from your employer that shows the amount withheld for payment to the charity. You can substantiate a single contribution of $250 or more with a pledge card or other document prepared by the charity that includes a statement that it doesn't provide goods or services in return for contributions made by payroll deduction.

The deduction from each wage payment is treated as a separate contribution for purposes of the $250 threshold.

Substantiating Contributions of Services

Although you can't deduct the value of services you perform for a charitable organization, some deductions are permitted for out-of-pocket costs you incur while performing the services. You should keep track of your expenses, the services you performed and when you performed them, and the organization for which you performed the services. Keep receipts, canceled checks, and other reliable written records relating to the services and expenses.

As discussed earlier, a written receipt is required for contributions of $250 or more. This presents a problem for out-of-pocket expenses incurred in the course of providing charitable services, since the charity doesn't know how much those expenses were. However, you can satisfy the written receipt requirement if you have adequate records to substantiate the amount of your expenditures, and get a statement from the charity that contains a description of the services you provided, the date the services were provided, a statement of whether the organization provided any goods or services in return, and a description and good-faith estimate of the value of those goods or services.

Please call us if you have any questions about these rules. Together we can make sure that you'll get all the deductions to which you are entitled when we prepare your 2014 tax returns.