Can I Write It Off as Charity?

By Ashley Eneriz on 10 February 2017 0 comments

A family member of mine has won some pretty sweet prizes through charity raffles. They have won tablets, and even a huge flat screen TV. When I asked them their secret, they said that they buy a lot of tickets, since raffle tickets are tax-deductible.

But wait. Is buying raffle tickets through a charity event really something you can write off on your taxes, especially when you get to take home a prize worth more than $500?

In short, no. More on that in a minute.

Just because you give money to what you consider to be a good cause, doesn't mean the IRS considers it tax deductible.

Here is a quick guide to what you can and cannot write off as charitable deductions.

1. Charity Balls and Fundraiser Buys

Many charities and churches sell fundraiser items, such as gift certificates, cookbooks, or other merchandise. You might think buying such products is considered a charitable contribution. But it's not in the eyes of the tax man. The IRS says that you cannot claim a tax deduction if you exchanged money for goods. "If you receive a benefit because of your contribution such as merchandise, tickets to a ballgame, or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received," according to the webpage.

This means that if you paid $120 for a $100 massage gift certificate in the name of charity, then you can only write off $20 as a donation. For charity balls, many times the organization will tell you if you can write off a portion of your ticket. However, you must deduct the fair-market cost of your meal, venue, and entertainment from the ticket cost — even though the charity may have paid little or nothing for those expenses. In many cases, once you subtract those costs from your ticket price, there is nothing left for you to write off.

So, if you really don't want that cookbook or a night at a charity event, but you want to donate and get a tax exemption, then donate money instead. If you donate cash or a check, make sure you get a receipt. You can also donate online to many organizations with a credit card, which will give you the proper documentation for tax purposes. (See also: Best Credit Cards That Give Back to Charity)

2. Raffle Tickets

Do not make the same mistake my relative made. The IRS guide to charitable contributions specifically states that you cannot write off any raffle tickets, lottery tickets, or bingo games purchased for charity. This is true whether you win something or not.

In fact, these raffle tickets are considered a bet, and you can write it off as a gambling loss deduction. However, you can only write off a gambling loss if you also report gambling winnings that same year. Gambling losses are only deductible up to the amount of gambling winnings, and must be reported on an IRS Form 1040.

3. Race or Walk Donations

Participants in a charity walk or race cannot write-off the entry fee. This is because you are paying to participate in the run or event. If you were to do a non-charity walk or racing event, you would still pay an entry fee.

If you donate money to an event like a cancer walk, not counting the entry fee, you can write it off because this is considered a straight donation. However, it is important to have proper documentation of your donation. Online donations are the easiest way to track your contributions and ensure your money goes directly to the organization.

4. Promised Donations or Pledges

Many charities hold pledge drives or allow individuals to sign up to give a certain amount of money each month. You cannot write off promised donations or pledges that you have not yet fulfilled. For example, if I signed up with Charity A to give $50 a month for a year in November 2016, I cannot claim that I donated $600 to the charity. Instead, I will only be able to write off $100 worth, for November and December. Only the actual money that's left your hands is deductible.

5. Political Donations

No matter who you voted for in the 2016 history-making election, you cannot write off any contributions you made to that party. This applies to all elections, not just the presidential vote. If you gave money to political organizations, you cannot write it off. Period. This rule applies to groups that lobby for law changes, as well.

6. Donated Time or Blood

No, you cannot write off donated time or blood, but thank you for doing so. Your generosity here won't lower your tax bill, but it will make a difference.

7. Donated Frequent Flyer Miles

Donating miles is a great way to make sure they get used for a good cause. However, you cannot write off your donation of miles. The IRS views your miles as a coupon or bonus discount. In the same tune, if you paid for a business trip or a trip for medical reasons with frequent flyer miles, you would not be able to write off the trip as a business or medical expense. (See also: 6 Ways to Sell or Donate Your Airline Miles)

8. Donated Clothing or Household Items

Donating unused items to Goodwill and other charities is a great way to clean out your closet or garage, and get a small tax kickback to boot. However, you are only allowed to deduct the fair market value of the item. For example, if you donated a designer purse that you paid $1,000 for, you cannot write off $1,000. Instead, you would need to claim the resale or eBay value of the item, which might only be $400.

There are a few apps that make tracking donations easier. Turbotax's ItsDeductible app allows you to track donations and will help you figure out the value of the item that you can write off. Donation Assistant Through TaxAct allows you to take photos of items you donate and receipts to stay on track all year long.

Make Sure Your Charities Are Truly Charities

It is important to make sure that you donate to charities that are eligible for tax write-offs. The charity must fall under section 501(c) (3) of the tax code. Don't assume that all nonprofits fit under the charity guidelines. When in doubt, ask the charity for their tax ID number for deduction purposes. (See also: How to Spot a Charity Scam From a Mile Away)

Generally, donations to organizations that are considered public charities are tax-deductible. The IRS classifies most churches, hospitals, qualified medical research organizations affiliated with hospitals, schools, colleges, and universities as public charities. The IRS also allows you to search organizations that qualify to receive a tax-deductible contribution on its site.

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