In our last post, we gave 8 IRS tips for understanding whether your donation is deductible. Tip 1 laid out that taxpayers cannot deduct contributions made to specific individuals, political organizations, or candidates. You can deduct gifts to qualified organizations only. To become qualified, most organizations (other than churches and governments) must apply to the IRS and receive “tax exempt status.” But how do you know who is qualified?
What is a qualified organization? You can ask any organization whether it is a “qualified organization,” and, if the answer is yes, they should have an “IRS Determination Letter” they should be willing to share with you. Another option is to use IRS Exempt Organizations Select Check and just enter the organization’s EIN or other identifying information and verify their exempt status. You can also call the IRS at (877) 829-5500 to find out if an organization is qualified.
What types of organizations are qualified? Generally, only the 5 following types of organizations can be qualified organizations:
A community chest, corporation, trust, fund, or foundation organized or created in or under the laws of the United States, any State, the District of Columbia, or any territory in possession of the United States (including Puerto Rico). It must be organized and operated exclusively for one or more of the following purposes: religious, charitable, educational, scientific, literary, the prevention of cruelty to children or animals.
War veterans’ organizations including posts, auxiliaries, trusts, or foundations, organized in the United States or any of its possessions.
Domestic fraternal societies, orders, and associations operating under the lodge system. But, note that a contribution to this type of organization is deductible only if it is to be used solely for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals.
Certain nonprofit cemetery companies or corporations. But, note that a contribution to this type of organization is not deductible if it can be used for the care of a specific lot or mausoleum crypt.
Government agencies and subdivisions. The United States or any State, the District of Columbia, a U.S. possession (including Puerto Rico), a political subdivision of a state or U.S. possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions. But, note that to be deductible, your contribution to this type of organization must be made solely for public purposes.
Example 1 You contribute cash to your city’s police department to be used as a reward for information about a crime. The city police department is a qualified organization, and your contribution is for a public purpose. You can deduct your contribution.
Example 2 You make a voluntary contribution to the social security trust fund, not earmarked for a specific account. Because the trust fund is part of the U.S. Government, you contributed to a qualified organization. You can deduct your contribution.
Religious: Churches, a convention or association of churches, temples, synagogues, mosques, and other religious organizations
Charities: Nonprofit charitable organizations such as the Red Cross and the United Way
Educational: Educational organizations, including the Boy (and Girl) Scouts of America, colleges, museums, and daycare centers if substantially all the childcare provided is to enable individuals (the parents) to be gainfully employed and the services are available to the general public. However, if your contribution is a substitute for tuition or other enrollment fee, it is not deductible as a charitable contribution
Health Related: Nonprofit hospitals and medical research organizations
Emergency Utility Programs: Utility company emergency energy programs, if the utility company is an agent for a charitable organization that assists individuals with emergency energy needs.
Civic & Public Service: Nonprofit volunteer fire companies, Public parks and recreation facilities, Civil defense organizations.
For more information and rules regarding what constitutes a qualified organization, read IRS Publication 526, Charitable Contributions.