The Internal Revenue Service has strict rules governing donations of non-cash property to tax-exempt nonprofit organizations. For gifts of property valued at over $250, the organization must provide the donor with a written acknowledgment of the donation that includes information required by the IRS. The organization is required only to acknowledge receipt of the property; it should not use the acknowledgment to establish the property's value. It is the donor's responsibility to establish the fair market value -- or FMV -- of the donated property based on IRS rules and to indicate the value when the deduction is listed on the donor's tax return. If the organization or the donor fails to follow the rules, the donor can lose the right to deduct the donation, and both parties can face IRS fines and penalties.
Gifts of Property Worth $250 or More
Prepare a written communication acknowledging receipt of the donation of property. This written communication can be a formal receipt, letter, email or any other written format that conveys the essential information. The communication must include the name of the charity, the date of the contribution and a description of the property donated. Do not include an estimate of the value of the donated property on the receipt.
Include a statement on the acknowledgment that no goods or services were provided by the organization in return for the donation, if that was the case; alternatively, provide a description and good-faith estimate of the value of goods or services that the organization provided in return for the donation. For example, if a donor donates a antique clock and the organization provides the donor with tickets to a concert in exchange, the communication must indicate the value of the tickets and that they were provided in exchange for the donation.
Send the written communication to the donor no later than January 31 of the year following the donation. This enables the donor to use the receipt to file his tax returns.
File Form 8282, Donee Information Return, with the IRS if the organization sells, transfers, exchanges or otherwise disposes of the donated property within three years of the date of receipt of the property. This form tells the IRS the actual value of the property when it was sold so the agency can compare it to the FMV estimate that was used by the donor.
Prepare IRS Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes or a substitute document containing the same information for any donation of a vehicle with a claimed value of more than $500. The form requests key information about the vehicle and its current value so the IRS can substantiate the donation.
Send copies B and C of Form 1098-C to the donor for his records. If the organization keeps and uses the vehicle, the copies must be sent to the donor within 30 days of the donation. If the organization sells the vehicle for cash, send the copies within 30 days of the sale of the vehicle.
Mail copy A of IRS Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes or a substitute document to the IRS by February 28 of the year following the donation. Use the address for the Internal Revenue Service Center that process paperwork for your area of the country that is listed in the instructions to the form.
Tips & Warnings
Acknowledge receipt of property valued at $5,000 or more by signing IRS Form 8283, Noncash Charitable Contributions. The donor should present this form when transferring the gift. The donor is required by the IRS to keep this form and file it with his income tax return when claiming the charitable deduction.
Acknowledge donations of securities that are not publicly traded on IRS Form 8283, if the total value is more than $10,000. Publicly traded stocks are treated as ordinary property and acknowledged according to the regular rules.
References & Resources
- Internal Revenue Service: Tax Topic 506 - Charitable Contributions
- Internal Revenue Service: Instructions for Form 8283
- Internal Revenue Service: Publication 526 - Charitable Contributions
- Internal Revenue Service: Charitable Contributions - Substantiation and Disclosure Requirements
- Stanford University: Findgate Resources - IRS Requirements for Tax Deductions on Charitable Donations
- Internal Revenue Service: Instructions for Form 1098-C
- Internal Revenue Service: Charitable Organizations - Substantiating Noncash Contributions
- Free Church Accounting: Contributions Receipt Rules
- CASE: IRS Rules and Regulations - What You Need to Know to Stay Out of Trouble