What documentation is required to comply with the latest tax legislation for charitable donations?
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To comply with the latest tax legislation for charitable donations, especially as updated by the One Big Beautiful Bill Act (OBBBA) effective for tax years beginning after December 31, 2025, donors must adhere to strict substantiation and documentation requirements. These requirements vary depending on the type and amount of the donation. Below is a comprehensive summary of the documentation required, incorporating the latest statutory changes, Treasury regulations, and recent case law:
1. General Recordkeeping for All Charitable Contributions
- Monetary Contributions (Cash, Check, Electronic Transfer, Gift Card, Payroll Deduction):
- Donors must maintain a bank record (such as a canceled check, bank statement, or credit card statement) or a written communication from the donee organization showing the name of the organization, the date of the contribution, and the amount of the contribution.
- For payroll deductions, a pay stub or Form W-2 plus a pledge card from the charity is required.
2. Contributions of $250 or More (Cash or Property)
- Contemporaneous Written Acknowledgment (CWA):
- For any single contribution of $250 or more, the donor must obtain a contemporaneous written acknowledgment from the charitable organization.
- The acknowledgment must include:
- The name of the organization.
- The amount of cash and/or a description (but not value) of any property contributed.
- A statement whether the organization provided any goods or services in exchange for the contribution, and if so, a good faith estimate of their value.
- If only intangible religious benefits were provided, a statement to that effect.
- The acknowledgment must be received by the earlier of the date the donor files the return for the year of the contribution or the due date (including extensions) for filing that return.
- Failure to obtain a proper CWA will result in denial of the deduction, even if the donation is not disputed.
3. Noncash Contributions Over $500
- Form 8283, Section A:
- For noncash contributions over $500 but not over $5,000, the donor must complete Form 8283, Section A, and attach it to the tax return.
- The form must include a description of the property, the date acquired, how acquired, cost or adjusted basis, fair market value, and method of valuation.
4. Noncash Contributions Over $5,000
- Qualified Appraisal and Form 8283, Section B:
- For noncash contributions over $5,000, a qualified appraisal is required, and Form 8283, Section B, must be completed and signed by both the appraiser and the charity.
- The appraisal must be prepared by a qualified appraiser, not earlier than 60 days before the contribution and no later than the due date of the return.
- The appraisal must describe the property in sufficient detail, state its condition, and provide the appraiser’s qualifications.
- For similar items of property donated to one or more organizations, the $5,000 threshold is determined by aggregating the value of all similar items.
5. Noncash Contributions Over $500,000
- Attach Qualified Appraisal to Return:
- For noncash contributions exceeding $500,000, the donor must attach a complete copy of the qualified appraisal to the tax return in addition to Form 8283.
6. Special Rules for Certain Property
- Household Items and Clothing:
- Must be in good used condition or better to qualify for a deduction, unless a single item is appraised at more than $500.
- Vehicles, Boats, Airplanes:
- Special acknowledgment rules apply, including reporting the vehicle identification number and the gross proceeds if the charity sells the vehicle.
7. Partial Interest and Closely Held Business Interests
- Entire Interest Requirement:
- Generally, a deduction is only allowed if the donor gives their entire interest in the property. Retaining any control, rights, or the ability to reclaim the property (such as in certain “Charitable LLC” schemes) will disqualify the deduction.
- The IRS is actively auditing and litigating cases where donors attempt to retain control or benefit from donated business interests.
8. New OBBBA Requirements (Effective 2026)
- Above-the-Line Deduction for Non-Itemizers:
- Non-itemizers may deduct up to $1,000 ($2,000 joint) for cash contributions to qualifying organizations, but must still maintain proper records and receipts.
- 0.5% AGI Floor for Itemizers:
- Only contributions exceeding 0.5% of AGI are deductible for itemizers, so documentation must clearly support the total amount claimed.
9. Consequences of Noncompliance
- Strict Denial of Deduction:
- Courts have repeatedly denied deductions where documentation was incomplete, even if the donation itself was not disputed. There are no second chances to fix documentation after the fact.
10. Summary Table of Documentation Requirements
Key Takeaway: Donors must obtain and retain all required documentation before filing their tax return for the year of the contribution. Failure to do so will result in denial of the deduction, regardless of the donor’s good faith or the actual occurrence of the donation.
Recommendation: Donors should verify that all receipts and acknowledgments from charities are complete and accurate, and consult with tax professionals to ensure compliance with all substantiation requirements, especially for large or complex gifts.
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