Deducting Charitable Contributions the Right Way
Editor's Note: This article is part of our 2014 Tax Tips series. Robert Flach is an expert with more than 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.
NEW YORK (MainStreet) If you donate to a church or charity the amount you can deduct as a contribution on Schedule A must be reduced by any goods or services you receive in exchange for the donation.
The classic example is the gift or premium offered to encourage you to contribute during a public broadcasting station pledge break. If you donate $60.00 you get a CD of the program you are watching, and if you donate $120.00 you get a DVD.
The amount you can deduct is $60.00 or $120.00 minus the fair market value of the CD or DVD. The fair market value is what you would pay if you were purchasing the item separately on Amazon or at your local K-Mart. If the CD costs $5.00 you can deduct $55.00. I expect the station will identify the value of the premium received on a receipt or a letter of acknowledgement.
When you purchase a ticket to a fund-raising dinner for a church or charity you must subtract the value of the meal you receive from the cost of the ticket to determine the amount you can deduct. Often the deductible amount is printed on the ticket. If you do not attend the dinner or event, and therefore receive no "goods or services", you can deduct the full amount of the ticket.
If the ticket you purchase is for a fund-raising dinner or event for a local political candidate or political party the amount you can deduct is $0.00. Political contributions are not deductible on the Form 1040.
A raffle ticket purchased from a church or charity is never deductible as a charitable contribution. However you may be able to deduct the cost of the ticket as a gambling loss if you have gambling winnings.
For a contribution of $250.00 or more you must get a written acknowledgement from the church or charity. Letters of acknowledgement must specifically identify the goods or services given to the donor for making the contribution or include the statement that "no goods or services, other than intangible religious benefits, were provided in exchange for the donation."
--Written by Robert D. Flach for MainStreet