If you are like many Americans, letters from your favorite charities have been appearing in your mailbox in recent weeks acknowledging your 2018 year-end donations. But what happens if you have not received such a letter — can you still claim an itemized deduction for the gift on your 2018 income tax return? It depends.
To support a charitable deduction, you need to comply with IRS substantiation requirements. This generally includes obtaining a contemporaneous written acknowledgment from the charity stating the amount of the donation, whether you received any goods or services in consideration for the donation, and the value of any such goods or services.
“Contemporaneous” means the earlier of 1) the date you file your tax return, or 2) the extended due date of your return. So, if you made a donation in 2018 but have not yet received substantiation from the charity, it is not too late as long as you have not filed your 2018 return. Contact the charity and request a written acknowledgment.
Keep in mind that, if you made a cash gift of less than $250 with a check or credit card, generally a canceled check, bank statement, or credit card statement is sufficient. However, if you received something in return for the donation, you generally must reduce your deduction by its value, and the charity is required to provide you a written acknowledgment as described earlier.
Substantiation is serious business
Do not take the substantiation requirements lightly. In one U.S. Tax Court case, the taxpayers substantiated a donation deduction with canceled checks and a written acknowledgment. The IRS denied the deduction, however, because the acknowledgment failed to state whether the taxpayers received goods or services in consideration for their donation.
The taxpayers obtained a second acknowledgment including the required statement. But the Tax Court did not accept it because it was not contemporaneous (that is, it was obtained after the tax return was filed).
2018 & 2019 deductions
Additional substantiation requirements apply to some types of donations. We can help you determine whether you have sufficient substantiation for the donations you hope to deduct on your 2018 income tax return and guide you on the substantiation you will need for gifts you are planning this year to ensure you can enjoy the desired deductions on your 2019 return.