Deducting Small Money Contributions to Charity: What Substantiation is Required?

When you donate to charity by cash, check or other monetary gift, your ability to deduct the gift as a charitable contribution depends upon several factors. First, you must itemize your deductions rather than take the standard deduction. Second, the charity must be an organization that is authorized by the IRS to accept deductible charitable contributions. Finally, it is essential that the details of the transaction be adequately substantiated. The Internal Revenue Code provides that a charitable contributions deduction is not allowed unless the contribution is property substantiated.

For gifts of money (as opposed to gifts of property, such as stocks, land, or artwork), the substantiation requirements depend upon whether the amount of the gift is less than $250 or $250 or greater. This article discusses the rules for substantiating money contributions of less than $250.

Pension Protection Act of 2006

In the Pension Protection Act of 2006, Congress amended the rules for substantiating money contributions to charity of less than $250. Before the change, contributions of money of less than $250 could be substantiated by a canceled check, receipt, or other reliable evidence. The revised rules are stricter, requiring substantiation of money contributions by bank record or written communication from the charity.

The former rules apply to money contributions to charity that are made in tax years beginning on or before August 17, 2006. The revised rules govern contributions that are made in tax years beginning after August 17, 2006. Individual taxpayers use the calendar year as their taxable year for reporting their income taxes. Thus, for calendar year 2006, the former rules apply because any contributions made during 2006 were made in the tax year beginning on January 1, 2006. The revised rules apply for calendar year 2007 because any contributions made during 2007 were made in the tax year beginning on January 1, 2007.

2006 Contributions

Money contributions of less than $250 made by individuals to charity during 2006 can be substantiated by the following methods: