Are your charitable income tax deductions at risk?

19 May 2023 | Applicable law: US | 5 minute read

How much attention do you pay to the receipts you get from charities thanking you for your donations? If you are like most people, probably not much. Every year, I have the opportunity to review charitable gift receipts my both I and my clients receive for our gifts. I’m often looking at receipts for particularly large donations, but also see many for smaller donations of cash. Are you surprised that nearly 30% of these receipts are deficient? 

For the last decade (or more), the IRS and U.S. Tax Court have routinely denied charitable deductions claimed on income tax returns. In many of these cases, deductions were denied not because gifts weren’t made (in fact, they were!), but because the donor didn’t properly substantiate the gifts. Here are some particularly scary examples: 

  1. A Texas couple, David and Veronda Durden, claimed charitable deductions for $25,000 of cash gifts. They had cancelled checks for all of their donations and receipts from the charities for the gifts, but the receipts didn’t satisfy the requirements of a contemporaneous written acknowledgment required by the Internal Revenue Code. The Durdens went back to the charities to correct the receipts, but the Tax Court ruled that it was too late. 
  1. A California couple, Joseph and Shirley Mohamed, claimed an $18.5 million charitable deduction for property given to charity. Their deduction was denied because they didn’t have a qualified appraisaleven though it was undisputed that they had made the donation and independent appraisals later determined that the value of the donated property was far in excess of $18.5 million.

Imagine missing out on available tax savings – as much as $7,000+ for the Durdens or $7 million+ for the Mohameds – for a charitable gift you actually made. If you are like me, this is not a welcome vision!

What should you do to be sure your charitable contribution deductions aren’t denied? 

First, refer to the chart below to identify what records you are required to keep to substantiate your gifts: 

Gift Type Gift Value Required Substantiation
Cash or Property
Less than $250
A bank record (such as a cancelled check, credit card statement, electronic funds transfer receipt) or written communication (such as a receipt or letter) from the charity showing the date and amount of the contribution 
Cash or Property
$250 or more
A contemporaneous written acknowledgement that includes:
  • The name and address of the charity
  • The date of the gift
  • The amount of a cash contribution and a description (but not the value) of any non-cash contribution
  • A statement that no goods or services were provided by the charity in exchange for the contribution, if that is the case, or a description and good faith estimate of the value of any such goods or services
The receipt should be dated before the earlier of the date you file your income tax return for the year of the gift or the due date of your income tax return (including extensions) for that year

Exceeds $500
Written records that include the date and manner in which the donated property was acquired (i.e. purchase, gift, inheritance, exchange) and the cost or other income tax basis of the property 
Property other than Publicly Traded Securities
Exceeds $5000
In addition to a contemporaneous written acknowledgement, you must:
  • Get a qualified appraisal of the donated property
  • Attach a properly completed Form 8283 to your income tax return

Second, when you receive receipts from charities, read them, and if needed, go back to the charity to request corrections. The most common problem I see is the failure to include a statement that “no goods or services were provided by the charity in exchange for the gift” when this is actually the case. While it is often smaller charities that unintentionally omit this language from their receipts, I regularly see larger charities make this mistake as well. 

Next, before you file your income tax return each year, be sure you have the proper substantiation for each gift already in hand. By the time you are audited, it is too late to go back to the charity for a correction. 

          Tip: If you are someone who makes a lot of gifts and doesn’t want to fiddle with tons of small receipts, consider making your gifts through a donor advised fund. This is what I do and it makes my charitable giving so much simpler. A donor advised fund is an account at a public charity (mine is with Fidelity Charitable). I donate cash or appreciated stock (avoiding capital gain recognition) to the fund and get one easy receipt for the donation that is always correct. Whenever I want to make gifts to other charities, I recommend the grant from my donor advised fund and Fidelity Charitable approves it as long as the recipient is a qualified charity. Fidelity Charitable handles all of the compliance and record keeping.

          Tip: If you donate to your own private family foundation, the substantiation requirements still apply. Be sure to have the foundation issue you a contemporaneous written acknowledgement and comply with any other substantiation requirements above.  

Finally, all of the above assumes you are donating to a charity eligible to receive tax deductible donations. You can always verify an organization’s eligibility prior to a donation here, and keep in mind that donations to individuals, political organizations, social clubs or homeowner organizations, most foreign organizations, for raffle tickets, or (in most cases) items purchased at charity auctions are not tax deductible. 

Don’t hesitate to call us with any questions or for a review of your charitable donation receipts. If you’d like more information on charitable gift substantiation, the IRS has some helpful pamphlets and publications which are available here: 

Publication 1771 – Charitable Contributions ­– Substantiation and Disclosure Requirements 

Publication 561 – Determining the Value of Donated Property 

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.


Join the club

We have lots more news and information that you'll find informative and useful. Let us know what you're interested in and we'll keep you up to date on the issues that matter to you.