Proper Recording of Cash Contributions from Individuals
Here are some reminders for when individuals can take a charitable contribution deduction on their individual tax return. Nonprofit organizations need to be aware of the requirements so that they can record contributions in the proper period and provide the required documentation to their donors.
- Contributions are deductible in the year made.
- Donations charged to a credit card before the end of 2024 count for 2024. This is true even if the credit card bill isn’t paid until 2025.
- Donations made by check are counted as a 2024 donation if the check is dated and postmarked in 2024. Checks dated in 2024 but postmarked in 2025 are considered 2025 donations. Donations made by check delivered to the organization are considered made on the date of the check or the date the donation is given to the organization, whichever is later.
- All donations must be made to a qualified organization to be tax-deductible. You can search for qualified organization on the IRS website using the Exempt Organization Select Check. This is an online database of all tax-exempt organizations registered with the IRS. Churches, synagogues, temples, mosques, and government agencies are also eligible to receive donations, even if they are not listed in the IRS database.
- Only taxpayers that itemize their deductions on Form 1040, Schedule A, can claim deductions for charitable contributions.
- The taxpayer must obtain an acknowledgement from the charity for each donation of $250 or more. The statement should include the following:
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- Name of the organization
- Date of the contribution (This is technically not required to be included on the donor receipt from the nonprofit; however, the donor must keep records showing the date of their donation.)
- Amount of contribution
- A statement regarding whether or not any goods or services were provided in exchange for the contribution
- The value of the goods or services provided by the charity to the donor and a statement including the tax deduction may be limited
- The written acknowledgement from the organization must be considered contemporaneous. The donor must receive the acknowledgement on or before the earlier of (1) the date on which the donor files the donor’s individual federal income tax return for the year of the contribution or (2) the due date (including extensions) of such return. It’s best practices for nonprofit organizations to send written acknowledgements to donors no later than January 31 of the year following the donation.
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