IRS Explains Deductions for Credit Card Gifts

Charitable gifts by credit card have become a quick and easy way for donors to give (and build up frequent flier miles), particularly at the end of the year.  The IRS recently published a letter answering a taxpayer’s question about deductions for gifts by credit cards (IRS INFO 2010-0153, March 24, 2010).  The IRS response stated, in pertinent part:

“Rev. Rul. 78-38, 1978-1 C.B. 67, provides that when a contribution is made to a qualified charity by credit card, it is deductible in the year the charge is made, regardless of when the creditor is paid.  See also Granan v. Commissioner, 55 T.C. 753 (1971).

“In order to substantiate your contribution, you must maintain adequate records to show that you made the contribution.  For contributions by credit cards, which are considered similar to a cash contribution, you must keep the credit card statement that shows the name of the charitable organization, the amount of the contribution and the date of the contribution.”

The IRS letter did not define, however, when a charge is considered to be “made,” so as to ensure that credit card gifts create current-year deductions.   Care should be taken with last-minute, year-end gifts by credit card, in light of IR 2006-192, in which the IRS stated: “Credit card statements should show the name of the charity and the transaction posting date” (emphasis supplied).   Seemingly, a donor could provide charity with credit card information in late December via telephone, e-mail or surface mail, with a strong likelihood that the “posting date” of the credit card company or bank would be in the following year. So while the donor may think the charge was “made” in one year, the IRS might take a contrary view upon audit.  A safer plan would be to mail a check in an envelope postmarked December 31 or earlier.

<back
Copyright © R&R Newkirk. All rights reserved.