Charitable Donations: What You Can and Can't Write-Off

Last Updated Dec 14, 2010 3:07 PM EST

Whether it was your kid's school or your friend's favorite cause, you probably got strong armed into making an unplanned charitable donation during the past year. You may have even been nudged into being a bit more generous since the money was going toward charity and you could write-off the expense. There are, however, some strict rules on what you can and can't deduct.

On Monday I interviewed Greg Rosica, coauthor of the Ernst & Young Tax Guide 2011, for a rundown on what the IRS allows folks to deduct from their taxes. Here's his take on some of the common requests for cash we all get throughout the year:

(Please note that I summarized and paraphrased some of Rosica's answers to help keep this post from getting too long.)
Charitable Deductions
1) Question: Can everyone deduct charitable donations?

Answer: Generally, when you file your taxes you have two choices: you can take the standard deduction or you can itemize. You can deduct charitable donations if you itemize. You can also write-off contributions if you pay the Alternative Minimum Tax (AMT).

2) Question: Any rules regarding cash, checks or credit card donations?

Answer: If you're using a credit card, the donation must be charged on December 31st. For checks, they must be given to the charity this year and you need to receive an acknowledgment letter in 2010. Since charities can get overwhelmed with mail at the end of the year, I would suggest mailing that check ahead of time so they do receive it and you have a canceled check to prove when you made the contribution.

3) Question: Can families write off cash they give to their local house of worship?

Answer: Up until a few years ago, you could write off any cash you put into a donation basket. But that's not the case anymore. You now need to substantiate your contributions with some form of receipt, canceled check or credit card statement. If you are the type who likes to give money to your local church each week, a better idea is to have an automatic payment sent to your house of worship on a regular basis.

4) Question: Can someone write off the cookbook he or she bought at a temple fundraiser?

Answer: No. Whenever you receive something in return for your donation it's called quid pro quo and that amount needs to be deducted from what you paid for the item. Typically when people are selling things, say, $25 for a cookbook, you're really just buying a book.

5) Question: What about that charity ball I attended to support my friend's favorite philanthropy?

Answer: The entire price of the ticket is not deductible. If an event costs $100, you have to deduct the cost of the entertainment, in this case probably the meal, and then you can write-off the remaining amount you spent. Generally, the charities figure out that amount for you. But sometime you will need to determine the value yourself.

6) Question: What about the Breast Cancer walk that a colleague asked me to donate to?

Answer: If you donate to it, yes, you can write it off. But you need a receipt. Rather than hand over cash, it's better to sponsor someone online with a credit card.

7) Question: Can folks write-off toys for charity or canned goods for a food drive?

Answer: Sure, the value of the items are deductible, provided you have a receipt.

8) Question: How about our time?

Answer: No. Your time has no charitable value. This holds true even if you are donating your professional services and have a regular billable rate you charge clients for similar work.

What charitable donations do you try to write-off?

Stacey Bradford is the author of The Wall Street Journal Financial Guidebook for New Parents.
Check Writing image courtesy of Flickr, CC 2.0
More on CBS MoneyWatch:
Old Toys? 4 Tips When Donating Them to Charity
3 Holiday Lessons for Kids
4 Reasons to Skip Store Credit Cards
The Best Holiday Gift? A Contribution to a College Savings Account