Charitable contributions you cannot deduct

It is a common perception of people that any payment made to a charitable organization is deductible from income.  However there is a fine line between contributions made for personal cause and contributions made without any personal benefit. IRS has specifically disallowed charitable contributions made for personal benefit.  Ignoring these may lead to fines, interests, penalties and tax audit.  Be careful about these contributions.

1.    Contributions to individuals – there are certain contributions which are treated as personal expenses.

a.    If you contribute to fraternal societies for paying medical or burial expenses of deceased members, they are not deductible.

b.    If you make contributions for the relief of a particular individual or family, they are not eligible for deduction.  Even if you contribute to a qualified organization, indicating that the contribution is for a specific person that will be your personal expense and not a charitable contribution.  For example, you may make donations for disasters like flood relief to qualified organizations.  However if you put a condition that the contributions are for a specific individual or group of individuals, they cannot be qualified for your tax deduction.  In the same way, if you make contribution to a hospital for taking care of a specific person, that contribution is treated as your personal expense even though the hospital is operated by a city or state.

2.    Contributions to non-qualified organizations – If you make contributions to organizations which are not qualified to receive tax deductible contributions, they are non-deductible.  So your contributions to organizations like homeowners associations, labor unions, political organizations, civic leagues and associations, chambers of commerce, the state bar, communist organizations or foreign organizations which are not controlled by any U.S. organizations are not qualified to be deducted as charitable contributions from your income.

3.    Contributions from which you benefit – If you receive or expect to receive any financial benefit on making a contribution (even to a qualified organization), you cannot deduct such contribution from your income.  Examples are – contributions for lobbying a particular legislation, cost of raffles, bingo, lottery, contributions to a retirement home for room, board or admittance.  Contributions which are indirectly benefiting you or your family members are also not eligible. So you make a contribution to a charitable organization and that money is used to purchase a cash value life insurance policy for the benefit to your family members, it is treated as your personal expense.

4.    You cannot claim a deduction for certain qualified charitable distributions (QCD).  So if a distribution is made directly by a trustee of your individual retirement arrangement (IRA), to certain qualified organizations they are not deductible unless you were of at least age of 70 ½ when the distribution was made and your total QCDs for that year are not exceeding $100,000.

5.    Value of your time or services – If you make blood donations to the Red Cross or to blood banks or you offer to work as an unpaid volunteer for a qualified organization, the value of such services is not deductible.

6.    Personal expenses – The expenses which are personal or incurred for the family are obviously non-deductible.  For example, if you’re away from home overnight while offering service to a qualified charitable organization, and you spend on your food during that period, that is your personal expense.

7.    Appraisal fees – If you pay some fees to find out fair market value of the property which you intend to donate, that is not deductible as charitable contributions.  You can however, claim these expenses as miscellaneous itemized deduction on schedule A –Form 1040.

8.    Contributions to a donor advised fund – If you donate to a fund and advice the fund on distributing or investing amounts held in the fund, such contributions are not deductible.

9.    Partial interest in property – you cannot deduct a contribution of less than your entire interest in property.