If you’re counting on a federal income tax deduction for donating to a charity, you should confirm that the charity has been approved by the IRS as a tax-exempt organization eligible to receive deductible contributions.
For some charities, this is easy — everybody knows the American Red Cross, the Salvation Army, and Goodwill are IRS-approved tax-exempt charities. But what about verifying that tax deductions are allowed for contributions to less well-known charities? Good question.
To determine which organizations are tax-exempt outfits eligible to receive deductible contributions, follow this procedure.
- Access the IRS website home page at www.irs.gov.
- At the top of the home page, enter “EO Select Check” in the search bar.
- Click on “EO Select Check.”
- Click on the blue “Exempt Organizations Select Check Tool” box.
- Under “Limit search to organizations that (select only one),” select “Are eligible to receive tax-deductible contributions.”
- To the extent you’ve got the requested information, fill in the blanks for the charity you’re searching for. You probably won’t have the charity’s EIN, but if you know its name and the city and state where it’s located, that should be sufficient. Hit the search key.
- A (probably long) list of charities will appear. Scroll down until you find the one you’re looking for. By clicking on the arrow beside the “Legal Name” link at the top of the list, you can order the list alphabetically by name of organization. You can also organize the list by the cities where organizations are located.
- Once you find the line for the charity you’re searching for, click on the “Deductibility Status” link on the far right. For example, if the status is PC, the organization is a public charity (the most common kind). You can make deductible donations of up to 50% of your adjusted gross income (AGI) to one or more public charities. (AGI is the number at the bottom of page 1 of your Form 1040; it includes all your income items and subtractions for certain deductible items such as IRA contributions, alimony paid to an ex-spouse, and self-employed health insurance premiums.) If the organization’s status is SOUNK, the outfit is an organization that supports a public charity. You can make deductible contributions of up to 50% of AGI to such organizations. If the status is PF, the organization is a private foundation. You can make deductible contributions of up to 30% of AGI to one or more private foundations. Contact us for details on the deduction limitations that apply to charitable contributions.
It is not necessarily a deal-breaker if an organization is not on the IRS-approved list. For example, some churches and church-related organizations may not appear on the IRS website’s list of tax-exempt organizations because they are not actually required to apply to the IRS for tax-exempt status. For a non-church organization, not being on the IRS-approved list doesn’t necessarily mean it’s not IRS-approved, but serious skepticism is appropriate. If you’re still considering a contribution, ask the organization to send you a copy of the IRS determination letter that recognizes its tax-exempt status.
It’s smart to be skeptical about making significant contributions to organizations that claim to be tax-exempt organizations. Taking the steps outlined in this letter is probably a good idea even if you don’t care about a tax write-off. If you have questions or want more information about deducting charitable contributions, please contact us.