Which Of My Charitable Donations Aren’t Tax Deductible?

So you bought a painting at a charitable auction only to be told by your tax preparer it’s not deductible. You even paid the charity directly. You even have a receipt. What gives?

Rather than cite tax code lingo, let’s talk in understandable terms. If you buy something at a charitable auction, it’s only deductible if you pay more than the value of the goods or services you received.

Example 1. A $50 gift certificate to a local favorite restaurant purchased for $40 is not deductible.

Example 2. The same $50 gift certificate purchased for $60 generates a $10 charitable deduction.

Example 3. You purchase a box of fruit to support a local high school band program for $30. The equivalent fruit at your local grocer would cost you $15, so you receive a $15 tax deduction.

How do you support your favorite charity and walk away with a nice tax deduction?
Go for the items that have low intrinsic values but sell for big dollars. I’ve attended charity auctions where progressive dinners held by teachers sold for $500 a couple. This is a win win! The charity receives a great donation and the buyer receives a nice tax deduction. The intrinsic value of the dinner may be only $50, but the buyer receives a $450 tax deduction.

Remember that it’s important that we continue to support charitable causes, and it’s not always about the tax deduction. Understanding these guidelines will help you avoid any tax confusion the next time you attend a charitable auction.

About the author

Troy Von Haefen, CFP®

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