Giving can be rewarding, whether it is tithing, gifts of clothing or other essentials, or even the gift of your time. But, as rewarding as giving can be, you may still ask, “Can I deduct donations or contributions to my church?”
The bad news is that gifts of your time to your church, while they may be valuable, are not deductible on your tax return. The good news is that other contributions, such as money or goods, might be.
Generally speaking, to deduct contributions to your church, you must itemize your deductions on Schedule A (Form 1040). This means that the sum of your charitable contributions, plus any other qualifying itemized deductions, must exceed your standard deduction for your filing status. However, for tax years 2020 and 2021, you could deduct up to $300 (up to $600 in 2021 if Married Filing Jointly) without itemizing.
As far as contributions to your church that you list as part of your itemized deductions on Schedule A, there are two types: cash and non-cash. Charitable cash contributions to your church are limited to 60% of your adjusted gross income (AGI) (100% of AGI in 2020 and 2021) and 50% of AGI for non-cash contributions - but you can carryover contributions you are unable to deduct in the current year for five years.
Any non-cash contribution of less than $250 will require a receipt from the church with the following: Name and address of the church, the date and location of the contribution, and a description of the property donated (if the donation is a security, additional information may be required). For non-cash contributions of $250 or more, but less than $500, requirements include all items listed previously, plus additional information on any goods or services you may have received in exchange for your donation. For non-cash contributions over $500 but not over $5,000, the IRS requires Form 8283 to be completed and filed with your return. If the non-cash contributions you donate exceed $5,000, then the fair market value of the goods must be assessed with an appraisal. Please note this $5,000 amount is not for just one donation, but rather the combined total value of all “similar” items donated (see example #2 below).
An additional tip: Any single cash contribution of $250 or more will require a written statement from the church. Cash contributions can be difficult to prove when it comes time to file your taxes. While it is easy to just “throw some money in the plate,” it is not the best way to go if you want the tax benefit of your giving. A better method of contribution is a check, credit card, or ACH payment from your bank. With these types of payments, you will have a record of contribution, and this, along with a written statement from the church, should suffice for documentation in an audit, if needed. Also, if any goods or services are received in exchange for your contribution, the value of those goods or services must be subtracted from the contribution amount before a deduction can be taken.
Let’s look at a couple of examples:
Example 1 – Bob and Lisa, a married couple, purchased tickets for a charity dinner hosted by the youth group at their church. The cost of the tickets is $100 each; the value of the dinner is $35 each. Bob and Lisa can deduct a contribution of $65 per ticket ($100 cost - $35 value of dinner received = $65).
Example 2 – Paula, a single taxpayer, moved during the tax year to a smaller home. As part of her effort to downsize, Paula got rid of a lot of clothing, furniture, and household items. Paula made five trips to her church to donate these items. For each trip, she estimates that the value of the items was $1,500. Individually, each donation was valued at less than $5,000, but the total value of the items (which are considered “similar” items) is greater than $5,000 (5 trips x $1,500 = $7,500); therefore, to take a deduction on her tax return, Paula needs proof that she obtained an appraisal for all the items before donating them.
As with all documentation used in your tax return preparation, be sure to hold on to your charitable receipts and statements from the church, as well as proofs of payment, in case you are ever audited.