By: Martin M. Shenkman, CPA, MBA, JD
T-shirts or sweatshirts with charity logos are de rigueur at walk-a-thons, bike-a-thons, and other charitable events. While these might motivate donors, do these ubiquitous small gift items impact contribution deductions? Yup. The general rule is that you have to reduce the amount of your contribution deduction by the fair value of any gift item received from the charity. However, a couple of exceptions are permitted to reduce the reporting burden on charities and taxpayers alike. The gift item (premium) can be ignored for tax purposes if your donation is $50 or more (adjusted annually for inflation -- $89.00 in 2007) and the value of the gift item is not more than 2% of your donation. You donate $100 and receive a key chain worth $1.90, no problem. Alternatively, if you donate $25 or more (adjusted annually for inflation -- $44.50 in 2007) and the gift item qualifies as a low cost article, it can be ignored. This is an item bearing the organizations name or logo which has a wholesale value of $5.00 or less (adjusted for inflation -- $8.90 in 2007). You donate $100 and receive a Jacket worth $25.00 at retail, but which the charity purchased for $8.50, it can be ignored. Rev. Proc. 90-12, 92-49, and 2006-53.
Subscribe to our email list to receive information on consumer webcasts and blogs, for practical legal information in simple English, delivered to your inbox. For more professional driven information, please visit Shenkman Law to subscribe.