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Charitable giving by the letter

By Goldman Sachs Ayco Personal Financial Management

Charitable giving can represent a significant tax savings strategy. So much so, that the IRS is placing increased emphasis on ensuring that taxpayers have the necessary documentation to substantiate these deductions. And they’re serious. They are disallowing deductions in their entirety if they are not supported with the proper documentation. Find out what you need to claim charitable deductions.

When do I need to obtain a letter?

If you’re planning to make a charitable contribution and wish to claim it as a deduction on your taxes you need to be aware of the requirements. Any donation of cash or property with a value of $250 or more requires a contemporaneous written acknowledgement of that gift from the charity. And if you should make more than one contribution of $250 or more in a given year, you should get one or more written acknowledgements from the charity to satisfy your obligations.

If you make separate contributions of less than $250, they do not require a written acknowledgement even if–over the course of a year–they add up to $250 or more. However, conservatively you should always ask for written substantiation–just in case.

What needs to be in the letter?

It’s important that the written acknowledgement from the charity provide the following information:

  1. The amount of cash and a description (but not a value) of any property you donated
  2. A statement as to whether the charity provided you with any goods or services in return for the donation, and a good faith estimate of their value if it did
  3. If the only goods or services provided by the charity consisted of intangible religious benefits, a statement to that effect

If the charity did not provide any goods or services in return for your donation, the acknowledgement must say that. Some charities fail to include such a statement, and this omission can cause your deduction to be disallowed. Be sure to request an acknowledgement that expressly states that no goods or services were provided in return for your donation.

Additional value requires additional requirements

Larger deductions, especially of property, may require additional substantiation of the donation, including an appraisal valuing the property and providing certain information required by the IRS. Failure to obtain this additional substantiation can also result in the disallowance of a charitable deduction.

What about payroll deductions and out-of-pockets?

Donations made through payroll deductions and unreimbursed out-of-pocket expenses incurred while performing services for a charity will also require written acknowledgements from a charity where the payroll deduction or unreimbursed expenses are $250 or more.

When should you obtain the written acknowledgement?

Be aware that there is a deadline! You must obtain the written acknowledgement by the earlier of the date on which you file a tax return claiming the deduction or the due date for that return, including extensions. Miss the deadline, and you’ll miss the deduction!

Want to learn more? Check out other articles from AYCO on financial planning and more.


Goldman Sachs Ayco Personal Financial Management

This material was prepared by The Ayco Company, L.P. d/b/a Goldman Sachs Ayco Personal Financial Management (“Ayco Personal Financial Management” or “Ayco”), an affiliate of United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”). This material was prepared for informational purposes only and should not be construed as personal financial planning, investment, tax, accounting, or legal advice. No investment decisions should be made using this data. GS PFM believes the material used for the article is accurate, but does not verify its accuracy independently and does not warrant or guarantee that is it accurate or complete. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. ©2021 The Ayco Company, L.P., d/b/a Goldman Sachs Ayco Personal Financial Management. All Rights Reserved. Brokerage services are offered through Goldman Sachs & Co. LLC and Mercer Allied Company, L.P. (a limited purpose broker-dealer), both affiliates of Ayco and members FINRA/SIPC.

Additional materials and revisions by © 2021 United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management. All Rights Reserved.

United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.

The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.

Information and opinions expressed by individuals other than GS PFM employees do not necessarily reflect the view of GS PFM. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.

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