Is Every Donation Tax Deductible?

Many believe that every donation to a charity is tax deductible. In actuality, there are charitable organizations which are not tax-exempt, and donations to these types of organizations are not tax deductible. The IRS offers a database of organizations so you can see if donating to a specific charity is tax-deductible.

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Look for 501(c)(3) Status

Whether it be money or tangible goods, in order for a donation to be tax deductible the organization to which it is given must hold 501(c) (3) status. Incorrectly writing off a deduction can result in the issuance of an audit. When organizations are tax exempt, you benefit from being allowed to deduct donations.

Time is not Deductible

Although time does have value, it is not tax deductible in terms of volunteering to work for an exempt charity. Volunteering is something done purely for charitable purposes, it has no value other than the joy of helping others. Some have attempted to deduct values based upon hours of volunteered time, but such attempts are not accepted.

Receiving a Gift for Making a Donation

Making a donation at charity events where prizes are awarded or items are raffled off are almost always non-tax deductible. This is because you receive something of value in return. So, even though your contribution seems like a charitable donation, in this instance it is actually a transaction between you and the charity.

Closing Thoughts

Prior to making donations, be sure to research the organization if tax deductibility is important to you. If it is not clearly listed in printed material that the organization in question is tax-exempt, inquire further for a definite answer. When donating items of value, always make sure that you get a receipt showing the value of the donation and what the item donated was.

Image credit: Anthony Easton

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Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

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