Basic Rules for Tax-Deductible Charitable Giving

It is beneficial for everyone involved when charities are able to issue tax receipts in exchange for donations. Many people take advantage of such receipts in order to help out charities while simultaneously reducing their tax burden. However, it is important for donors (and charities) to understand what gifts qualify for tax receipts and what gifts do not.

1. Only donations made to charities officially recognized by the government can be receipted for tax purposes.

Registered charities are allowed to give valid tax receipts for donations. Other organizations, regardless of their charitable activities, are not. When in doubt, ask. The receipt issued by the charity should include a number that has been assigned to them by the federal government which identifies them as a registered charity.

2. Only donations made before the end of the calendar year can be claimed.

A gift given on January 1st applies to the new year and cannot be claimed as a donation made during the previous year. This is true even if the check is dated for December 31st.

3. Gifts-in-kind cannot be claimed unless you receive a letter (or form) from the charity.

For example, if you make a donation of used clothing or furniture to the local Salvation Army Thrift Store, you will need to receive an official statement from the Salvation Army stating that you have made the donation. Also, you will need to determine the value of the donation and be able to explain how you arrived at that valuation. (You can search online for tax valuation guides for donated goods.)

4. You cannot claim volunteer hours or services rendered.

You can only claim donations of actual money or property. For example, if you donate time to design a new website for a charity, you cannot claim that on your taxes regardless of the perceived value of the service. A legitimate tax-deductible alternative is to be paid for your work and then donate the money back. Likewise, if you loan equipment or land to be used by a charity, it is not tax deductible. You would need to actually give ownership of the equipment or the land to the charity in order to claim it as a charitable donation. Then it could be claimed as a gift-in-kind.

4. It is not a charitable donation if you received something in return.

If a charity solicits your donation by offering a gift in return, the value of that gift must be subtracted from total amount given. For example, if the charity gives you a book valued at $20 when you make a donation of $100, your actual tax-deductible donation is only $80.

5. Purchasing products from a charity cannot be counted as making a charitable donation.

If a charity operates a store or is simply selling off some old office equipment, your purchases cannot be claimed as charitable giving. You are receiving goods in exchange for your money. This is not a donation.

7. You can designate your donation to go toward specific programs but not specific people.

It is commendable to want to help out poverty stricken families. But you cannot give personal gifts to a family by funneling the money through a charity while expecting to receive a tax receipt. For example, churches may operate a benevolence fund to help needy families at Christmastime. You can contribute toward that fund, but you cannot direct the church to forward those funds to a specific family that you know. You can suggest that the family be considered to be included in the program, but the final decision must be left up to the church. You can, however, gift gifts anonymously to specific people through the church (or other willing charities) without receiving a tax receipt in return.