Donor and Tax Information
Donor Purchases and Taxes
People often assume that the items they purchase at a charitable organization’s fund-raising event are completely tax-deductible, but the IRS disagrees. When it comes to purchasing auction items, donors cannot take a full deduction for the item; according to the IRS, only the fair market value of an item above what the donor paid for it is actually tax-deductible. For example, if a donor paid $40 for an item worth $30, they can deduct $10 for purchasing the item. But if the donor paid $40 and the item is worth $50, no portion of their gift is tax-deductible. This rule also applies to physical items and event tickets.
Taxes and Charity Responsibilities
Ultimately, charities are responsible for conveying IRS tax laws to their donors. If charities neglect to notify donors about the extent of the tax deductibility of their gifts and purchases acquired at fund-raising events, the charity can be fined up to $10,000 per year. If a charity is the subject of such a fine, the charity must also provide donors with refunds for event items that were not tax-deductible. The exception to this requirement are gifts of “insubstantial value,” such as cash gifts for less than $50, inexpensive tokens, such as calendars and T-shirts, or promotional items sent to the donor without consent.
Critters in Need Inc is a 501(c) 3 non profit corporation • Tax Id # 47-1309599