5 Tips for Tax-Smart Charitable Contributions

The generosity of the American people is never more evident than during a disaster event. Houston has experienced widespread devastation as a result of Hurricane Harvey. In its aftermath, hundreds of relief funds are being set up and promoted to aid those impacted by the storm. You clearly want to help, so how do you ensure that your generous donation will not only benefit those in need but also be tax deductible?

Here are a few things to consider.

1. Verify Tax Exempt Status

Make sure your recipient organization has been granted 501(c)(3) tax exempt status by the Internal Revenue Service. These organizations have been established for charitable purposes and donations to them are tax deductible as allowed by law. They also are required to file annual tax returns reporting their charitable contribution income, their unrelated business taxable income, and their business expenses. These returns are available for public inspection, usually upon request. You can confirm an organization’s exempt status on the IRS website.

2. Get a Receipt

Organizations that are eligible to receive tax deductible donations are required to provide a receipt to donors for any gift of $250 or more. The receipt acknowledges the donation amount, the date of donation, the organization’s tax exempt status, and their tax ID number. You should obtain and keep the receipt as additional support for your tax deductible donation.

3. Be Wary of Crowdfunding

Crowdfunding sites such as GoFundMe or YouCaring are popular ways to raise money for various types of causes on social media. Since crowdfunding websites are open for use by anyone, many of the funding pages are not established by qualified charitable organizations. Before giving through such sites, do your homework to ensure that your support is going to a charitable organization with qualifying tax-exempt status.

4. Appreciated Securities

Consider donating appreciated stocks, bonds, or mutual funds to a charity or a donor advised fund. When you donate appreciated securities held longer than a year, you are able to deduct the fair market value of the security as a charitable contribution. This also avoids the capital gains tax because the security is being donated instead of being sold.

5. Autos and Boats Worth More Than $5,000

In most cases you will need a written appraisal, which will be attached to the return. You will also need a written acknowledgement from the donee organization which will include any proceeds from the disposition of the vehicle by the donee organization. This acknowledgement must also be attached to the return.

In addition, you will need a Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, from the donee organization. Most charities will use the Form 1098-C to fulfill the written acknowledgement requirement. And yes, you will attach the Form 1098-C to your tax return.


If you have additional tax questions, give me a call at (713) 785-8939. I’d love to hear from you.

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