IRS Documentation Rules for Charitable Giving

As year-end approaches, charitable giving often takes center stage. If you itemize deductions, your donations may qualify for a tax deduction, but only if you meet IRS substantiation requirements. Here’s what you need to know to protect your tax benefits.

Why Substantiation Matters

The IRS requires donors, not charities, to maintain proper documentation for all deductible contributions. Failure to comply can result in disallowed deductions, even for genuine gifts. The rules differ for cash and noncash donations.

Cash Donations

For any cash gift, you must have one of the following showing the charity’s name, date, and amount:

• Bank records (e.g., statements, canceled checks, EFT receipts, credit card statements).
• Written communication from the charity (official receipt, letter, or email).

Additional Rule for Gifts of $250 or More

You need a contemporaneous written acknowledgment (CWA) from the charity that includes:

• The amount of the contribution.
• A statement whether goods or services were provided in exchange, and if so, a good-faith estimate of their value.

Obtain the CWA by the earlier of

1. The extended due date of your tax return, or
2. The date you file the return.

Payroll deductions should be substantiated with

• Employer documentation (e.g., Form W-2 or pay stub) showing the amount withheld and paid to charity
• A pledge card or similar document from the charity
• For gifts of $250 or more, the charity’s document must state that no goods or services were provided.

Noncash Donations

Documentation requirements depend on the value:

• $250 and Under: Receipt from the charity showing name, address, date, and description of property.
• $250 - $500: Receipt plus CWA.
• $501 - $5,000: CWA and complete Section A of IRS Form 8283 with your return.
• $5,000+: All of the above plus a qualified appraisal and Section B of Form 8283 signed by both the appraiser and the charity.

Special Circumstances

• Artwork valued at $20,000+ or any donation over $500,000: provide document such as an appraisal to your return.
• No appraisal required for publicly traded securities.
• Additional rules apply for vehicles, clothing, household items, and privately held securities.

Charitable Giving in 2026 under One Big Beautiful Bill (OBBB)

• Universal deduction for non-itemizers: Up to $1,000 ($2,000 for joint filers) for cash gifts to qualified charities.
• New AGI floor for itemizers: Only donations exceeding 0.5% of AGI are deductible.
• Example: AGI $100,000, first $500 of donations not deductible.
• Cap on tax benefit: High-income taxpayers see deduction benefit capped at 35%.
• Corporate giving: Deductible only to the extent contributions exceed 1% of taxable income, still capped at 10%.

Plan Ahead

Tax savings shouldn’t be your only reason for giving, but they can influence how much you give and when. To maximize benefits:

• Accelerate donations before 2026 if you expect the new floor to limit deductions.
• Bunch contributions in a single year to exceed the AGI threshold.
• Get documentation early, especially for high-value non-cash gifts.

Proper Documentation

Charitable giving is rewarding, but the IRS rules are strict. Substantiate every donation with proper documentation to ensure you claim the deductions you deserve. If you’re unsure whether your documentation meets the requirements, consult a Lumsden McCormick tax professional.