The 2018 Tax Cuts & Jobs Act ushered in quite a few changes regarding itemized deductions. One of the biggest changes was an almost doubling of the standard deduction. This should significantly reduce the number of taxpayers who will be itemizing deductions starting with tax year 2018. Therefore, each individual itemized deduction will become even more important for those taxpayers close to the standard deduction amount or exceeding it. One area that has always required special attention and certainly still does are charitable contributions.
Taxpayers should be aware that there are substantiation requirements mandated by the Internal Revenue Service to claim an itemized deduction for a charitable contribution. Without proper substantiation, these deductions could be disallowed by the Internal Revenue Service leaving taxpayers owing additional taxes. No taxpayer wants to lose a potential deduction simply because they did not meet certain requirements mandated by the Internal Revenue Service.
A taxpayer can deduct a charitable contribution of $250 or more only if the taxpayer has a contemporaneous written acknowledgment from the charitable organization. The written acknowledgment must include the following:
- Name of the charitable organization
- Amount of cash contribution or description of non-cash contribution
- Statement that no goods or services were provided by the charitable organization
- If goods or services were provided by the charitable organization, a good faith estimate of the value should be listed
To be contemporaneous, the written acknowledgment must generally be obtained by the donor no later than the date the donor files the return for the year the contribution is made.
A taxpayer may not claim a deduction for any contribution of cash, check, or other monetary donation unless the taxpayer maintains a record of the contribution in the form of either a bank record (such as a canceled check) or a written communication from the charity (such as a receipt or a letter) showing the name of the charity, the date of the contribution, and the amount of the contribution.