As the season of giving approaches, people often open their hearts and their wallets for good causes. In some cases, donations to those causes may be deducted from your taxes, but not always. If you’re hoping to support a cause and take advantage of a tax deduction, be sure to check with your accountant or attorney before you write that check or click “give.”
“There are many caring things that people do that are not considered charitable in the eyes of the Internal Revenue Service,” said Frances A. Aitken, CPA, chief operating officer at Berks County Community Foundation. “That doesn’t necessarily mean you shouldn’t give, but it’s good to be aware of the types of donations that do not qualify for a deduction.”
In general, donations to the following types of organizations qualify for the charitable tax deduction:
- Public charities as defined by section 501(c)3 of the internal revenue code. You can search for organizations by name at www.irs.gov/charities-non-profits/search-for-tax-exempt-organizations and look for deductibility code “PC.”
- Religious organizations such as churches, temples, and synagogues.
- Nonprofit educational institutions, although be sure to check to see if your school has a foundation that accepts donations on its behalf.
- Governmental organizations, although sometimes governmental organizations such as parks, libraries, or police K9 units prefer donations be made to a “Friends” group that is a 501(c)3 public charity.
In general, donations to the following types of causes DO NOT qualify for a tax deduction:
- Donations to support a specific family or individual who is in need or who has experienced a loss.
- Donations to membership organizations that are not listed as public charities, such as private clubs, even if they are small and don’t make a profit.
- Donations to parent volunteer groups that are not under a school’s umbrella or listed as a public charity.
- Donations to start-up business ventures.
This list is not exhaustive, and regulations change often, so be sure to seek the advice of a qualified financial professional if you are unsure if your donation is tax-deductible. “At the Community Foundation, we manage funds created by local people to provide grants for causes they care about,” Aitken said. “We’re governed by IRS rules too, so we always check the charitable status of an organization before we issue a grant. If you’re interested in the charitable deduction and you aren’t sure if the organization you’re giving to is charitable, call your accountant.”
To make a tax-deductible gift to a charitable fund managed by the Community Foundation, visit www.bccf.org and click “Give Now.” With more than 370 charitable funds under management, you’re sure to find one that provides grants or scholarships for a cause you care about. To learn more about creating a charitable fund of your own, call the Community Foundation at 610-685.2223.