Jul
22
2010

IRS Confirms Timing of Deductibility of Donations by Credit Card

Each year, sometime in early December, my spouse and I discuss our charitable donations to be made prior to year-end. We look at what donations we made up to that point, and then together decide what we’re going to donate prior to December 31 so that we can deduct these donations on that year’s income tax return. Once we decide our charities and amounts, we set about to implement our plan. Frequently, that means going online and giving via credit card payment through the organization’s website.

Frankly, it never occurred to me that because I actually pay these credit card bills in January of the following year that there could be an argument that because I actually paid the amount the following year I couldn’t deduct it the year in which I clicked “confirm donation” on the website.

I’m in luck. The IRS recently confirmed that you can deduct charitable donations made by credit card in the year the charge is made, regardless of the timing of the payment of the credit card bill.  The IRS states that you must retain the credit card statement which shows the date of the charge, the charity’s name and the amount of the donation.  While individual taxpayers must use cash basis accounting for calculating tax, here is an element of an accrual-based method that we can use for our benefit.  And, I’m glad to know that my past practices won’t get me in trouble.  IRS INFO 2010-0153

1 comment

  • That’s great news for donors. Having worked in the trenches at some very small museums, however, I would note that if a donor is considering a end-of-year gift to a small nonprofit via an online donation, to keep in mind that some online gifts are not processed automatically. That is, the information is transmitted to the organization, who then manually runs through the charge. If you go online to make the donation on December 31, a staff person may not receive the info until January 2, and therefore will run it through in the wrong year.

    Large nonprofits likely have the process automated, but your local animal shelter, historical society, and homeless shelter may not. So try not to wait until the very last minute to make your gifts!

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