Tax Laws on Church Donations

by Jeff Franco J.D./M.A./M.B.A.

Federal law bestows automatic tax-exempt status on churches and other religious organizations. As a parishioner, you benefit from this tax-exempt status as well since all donations you make to churches may be deductible on your tax return. There are, however, a few caveats in the tax law governing church donations you should be aware of so that you can maximize your tax savings.

Church Donation Rules

Every church donation you make, whether in cash or property, can increase your charitable donation deduction -- provided the only benefit you receive in exchange is an intangible religious benefit. If you do receive other benefits that have more than just a token value, such as a meal at a church function, your deductible donation is equal to the price you pay to attend the church dinner minus the fair market value of the meal you receive. For example, if your church hosts a dinner to raise funds and charges $100 per ticket but offers a steak dinner that is valued at $30 – you can treat $70 as a deductible charitable donation. When your donation is in the form of property such as used household items that the church plans on selling, the amount of your deduction is equal to the fair market value of the property. Fair market value is the price for the items had you put them up for sale, not the price you originally paid for them.

Keeping Track

The Internal Revenue Service requires that you retain documented proof of each cash donation you make to a church. This can take the form of a credit card bill, bank statement, canceled check or if made in cash, a receipt from the church acknowledging the donation. If any single cash donation totals $250 or more, you must obtain a written acknowledgment from the church in addition to the documentation. In some cases, you may need to obtain appraisals and file additional tax forms with your return.

How to Deduct

Since deductions for church donations can only be taken on a Schedule A attachment to your tax return, you’ll need to itemize your deductions rather than take the standard deduction to see any additional tax savings. Generally, it’s only beneficial to itemize when the total amount of deductible expenses you report on Schedule A is larger than the standard deduction for your filing status.

Annual Limitations

Your total donation deduction cannot be more than 50 percent of the adjusted gross income reported on your 1040 form. But if it does, you can at least deduct those donations that exceed the 50 percent limit on the tax returns you file over the next five years.

About the Author

Jeff Franco's professional writing career began in 2010. With expertise in federal taxation, law and accounting, he has published articles in various online publications. Franco holds a Master of Business Administration in accounting and a Master of Science in taxation from Fordham University. He also holds a Juris Doctor from Brooklyn Law School.

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