The Nonprofit FAQ: Tax Deductions

Select an FAQ   (28):

Are donations to Canadian organization deductible for US taxpayers? Taxpayers with income in Canada can deduct charitable gifts to Canadian organizations. US taxpayers can only deduct gifts to US organizations from US income.

Can a business receive a tax-deduction for an in-kind gift? Yes, but in many cases, such gifts are treated as business expenses, which is often simpler and just as effective for the donor.

Can a Donor Retrieve Gifts of Money or Goods? In most cases, the answer is 'no.'

Can a non-US organization receive tax deductible donations? Deductions may be taken from US personal income tax only for gifts to US organizations; some gifts to Canada, Mexico and Israel may also qualify.

Can a tax-exempt organization sell coupon books to raise money? Selling coupon books is not an exempt activity (regardless of how the funds are used) unless the books are somehow related to the organization's exempt purposes.

Can I donate my door prize back and get a tax deduction? Yes. But you may not want to. Best to decline the prize entirely so there are no tax consequences of any sort.

Can I Get a Tax Deduction if I Charge a Nonprofit Below-Market Prices? In general 'no.' Deductions only reduce tax liability on income that has actually been received.

Can US corporations contribute to activities outside the USA? Depending on the position of the corporate donor, contributions used for activities outside the US may or may not generate a tax benefit for the corporation.

Can volunteers and board members deduct out-of-pocket expenses? In general, yes. Volunteers for charitable organizations can deduct unreimbursed expenses.

Can we convert our swim club to 501(c)(3) status? 501(c)(3) organizations must be dedicated to a charitable purpose. A social club will have to make very significant changes to qualify for 'public charity' status.

Can we sell donated equipment and use the proceeds? The feelings of the donor as well as federal regulations must be considered when determining the use of a donation.

Can you get a tax deduction for a gift to 'your own' nonprofit? When you work for a nonprofit -- either for pay or as a volunteer -- you can make the same sort of gifts anyone else could make.

Donor Basics A compilation of FAQ items just for donors in the United States including tips and resources for responsible giving, explanations of what types of donations are deductible, and lists of nonprofit organizations worldwide.

General resources about nonprofit taxation See the Free Management Library at http://www.mapnp.org/library/tax/np_tax.htm

How long must you keep an in-kind gift? There is no time limit, but if a large gift is disposed of within two years, there is a form that must be filed with the IRS.

How should donors calculate fair market value of premiums? The IRS defines fair market value as the amount a willing buyer would pay a willing seller.

How should we acknowledge in-kind gifts? Enthusiastically, of course. But there are some errors that must be avoided in this specialized area. Auctions require further attention.

I want to start a campaign to raise money for a cause. What do I need to worry about? Besides finding the money, you mean? Well, there are actually several issues that you should consider before running your own fundraising campaign.

Is a donation to a government agency tax deductible? Generally yes, so long as the gift is used for public purposes.

Is IRS recognition necessary before we receive donations? Strictly speaking, no. But many larger donors require evidence of 501(c)(3) status and it offers reassurance to all.

Is it Possible to Receive a Deduction for a Gift of Services? In general, the answer is 'no.' A deduction cannot be taken when no income has been earned.

Is the cost of a members' magazine tax-deductible? Answering the question is complicated. Here is some guidance.

Is the cost of a raffle ticket deductible? Purchasing a 'chance' to win something does not count as a charitable deduction.

Setting Up a Fund to Help People Meet the Costs of Fighting a Disease Gifts to individuals generate no tax deduction. There are other complications. Working with a community foundation can help.

The Tax Implications of Planned Giving Helping Yourself and Your Favorite Community Organizations (From the Seattle Times October 15, 1998. By David Keene, CPA, and David Endicott. Reprinted with permission.)

What about car donation programs? Car donation programs can be effective for both donors and charities. New rules place new limits on such programs from January 1, 2005.

What is 'substantiation'? Why should donors care? If you make a cash contribution of any size, you have to have 'substantiation' for the gift in order to deduct the gift from personal income taxes.

What membership benefits should we offer? It depends. On the purposes of your organization and the environment in which you operate. This item discusses some of the considerations.