While the 2017 Tax Cuts and Jobs Acts (TCJA) restricted charitable contributions for those who don’t itemize, cash contributions have been expanded from 50% to 60% of the taxpayer’s contribution-base for those who will itemize and non-cash contributions have not changed. In an effort to combat the potential impact the 2017 TCJA will have, many non-profit organizations and their advisors are seeking new ideas to attract new donors and working hard to deepen relationships with existing supporters. While various strategies may be implemented, one area that may regain some focus is that of noncash contributions; which may require additional substantiation. The substantiation requirements of non-cash contributions will depend on the value of the property donated:
Property valued at less than $250: Taxpayers must receive and keep a receipt from the charitable organization showing (1) the name of the organization, (2) the date and location of the contribution, and (3) a reasonably detailed description of the property. However, you are not required to have a receipt where it is impractical to get one (i.e. if you leave property at a charity’s unattended drop site). Additional record keeping requirements include keeping written record of the address of the organization, the fair market value of the property (i.e. including how it was figured), the cost basis, the amount you claim as a deduction for the tax year, and the terms of any conditions attached to the contributed property.
Property valued at $250-$499: The same substantiation requirements and record keeping for property valued less than $250 apply, but if more than one contribution over $250 is made, a separate acknowledgment for each or one acknowledgment that shows all contributions is required. In addition, the acknowledgment must be (1) in writing, (2) include a description of the property donated, state whether the qualified organization gave any goods or services as a result of the contribution, and (3) include a description and good-faith estimate of the value of any goods and services given. This acknowledgment must be received by the taxpayer on or before the earlier of the date the return for the year of the contribution is filed or the due date, including extensions, for filing the return.
Property valued at $500-$4,999: Taxpayers must have the acknowledgment and written records described above for contributions of property valued at $250-$499. In addition, the taxpayer needs record of (1) how the property was acquired (purchase, gift, inheritance, etc.), (2) the date the property was received by the taxpayer, and (3) the property’s cost or basis. If, for reasonable cause, information is not available regarding acquisition date or the cost basis a statement with an explanation may be attached to the return.
Property valued in excess of $5,000: In addition to the items needed for contributions valued at $500-$4,999, a qualified appraisal is generally required for contributions of property values over $5,000. In determining whether the taxpayer has over $5,000 in contributions, all similar items donated to any charitable organization within the tax year are combined. It is important to note that the donee organization is not a qualified appraiser for the purpose of valuing the donated property.
In addition, other forms may be required in order to claim the charitable deduction and significant penalties can be assessed to the organization for failing to provide these forms to the donor:
Form 8283, Noncash Charitable Contributions: This form must be attached to the tax return to support charitable deductions claimed in excess of $500 for all contributed property.
Form 8282, Donee Information Return: This return is required to be filed if an organization receives a charitable deduction property and disposes, sells, or exchanges the property within 3 years; unless the property is valued at $500 or less or is distributed for charitable purposes. The form is required to be filed within 125 days of the disposal, sale, or exchange and a copy must be provided to the previous donor.
Form 1098-C, Contributions of Motor Vehicles, Boats and Airplanes: A donee organization must file a separate form for each contribution of a qualified vehicle that has a claimed value of more than $500. A qualified vehicle is any motor vehicle manufactured primarily for use on public streets, roads, and highways; a boat; or an airplane (Note: property held by the donor primarily for sale to customers, such as inventory of a car dealer, is not a qualified vehicle). Contemporaneous written acknowledgement of the contribution must be supplied to the donor otherwise they cannot claim the deduction. An acknowledgment is considered contemporaneous if given to the donor no later than 30 days after the date of sale or contribution.
It is important to understand non-cash contribution requirements in order to maximize your deductions and avoid being unable to claim your donations. If you have questions about noncash charitable deductions, how your charitable deductions may be impacted by the Tax Cuts and Jobs Act, or how to maximize your charitable donations, Abacus CPAs is here to help! Call us today at 417-823-7171 or visit our website www.abacuscpas.com! Better Guidance. Smarter Decisions.